Bank of Korea Governor Warns: Promoting Domestic Cryptocurrency Stablecoin Plans May Backfire
The Bank of Korea recently issued a warning regarding the Korean won stablecoin plan, suggesting that it may inadvertently strengthen the position of the US dollar.
Governor Lee Chang-yong pointed out at a press conference on Wednesday that issuing a won stablecoin could stimulate market demand for exchanging into dollar stablecoins, which contradicts President Yoon Suk-yeol's strategy of internationalizing the won through digital finance.
Currently, the global stablecoin market has surpassed $260 billion, with dollar-denominated stablecoins accounting for over 97% of the market value, further highlighting the competitive pressure faced by the won stablecoin.
While the presidential office advocates for the development of a won stablecoin to curb capital outflows, the central bank is more focused on potential risks. Governor Lee Chang-yong emphasized that South Korea needs to prioritize establishing a regulatory framework to address two major challenges: first, the shift of payment and settlement business from the banking system to non-bank institutions could weaken traditional financial stability; second, increasing cross-border capital flows complicate foreign exchange management. Therefore, he also specifically called for an assessment of the changes in profitability in the banking sector against the backdrop of the rise of stablecoins, demanding a more comprehensive financial transformation roadmap.
This policy divergence comes at a crucial time when the US 'GENIUS Act' has just been passed, which will allow dollar stablecoins to expand rapidly on a global scale. It is expected that South Korea's Ministry of Economy and Finance and the Financial Services Commission will work with the Bank of Korea to formulate policies, but how to balance monetary sovereignty with financial stability remains the core challenge facing the won stablecoin strategy.
As of last year, data showed that the won accounted for less than 5% of international settlements; if not handled properly, the digital currency revolution may instead reinforce the dominance of the dollar.
In summary, the warning from the Bank of Korea Governor highlights the complexity and risk factors of monetary policy in the era of digital currency. The planned implementation of the won stablecoin concerns not only monetary sovereignty but also the financial stability of the country and the balance within the global monetary system.
Thus, in the context of the global expansion of dollar stablecoins, how South Korea formulates appropriate policies and balances innovation with risk will be a significant test of its financial wisdom.
What do you think South Korea should do to reasonably formulate its stablecoin policy? See you in the comments!