"Is the 'Crypto Nation' Stock Market Turning into a Crypto Circle? Stablecoins Propel Korean Stocks to Lead Asia"

Regulations have yet to be implemented, but trading has become frenzied; South Korea's stock market is truly on the verge of becoming a 'crypto circle.'

The South Korean stock market has experienced significant growth this year, mainly driven by the surge in digital assets pegged to the won. The catalyst for this rally is the promise made by newly elected President Lee Jae-myung to support stablecoins backed by the national currency.

As of last week, the KOSPI index has nearly risen by 30% this year, with companies related to the Bank of Korea's digital currency plan, such as Kakao Pay and LG CNS, seeing significant stock price increases. Kakao Pay's stock price has doubled this month, while LG CNS once rose by nearly 70%, before pulling back.

On the South Korea's KOSDAQ market, shares of fintech security company Aton surged by 80%, while smartphone game developer ME2ON saw its stock price triple due to its subsidiary launching a dollar-backed stablecoin for casino platforms.

This round of market activity has driven the KOSPI to a nearly 30% increase year-to-date, reaching a near four-year high, making South Korea the strongest-performing stock market in Asia in the first half of 2025. A large influx of retail investor funds has swelled the balance of margin trading to 20.5 trillion won.

Despite the bullish market sentiment, the government has yet to announce specific regulatory policies for won-backed stablecoins, with current trading primarily driven by expectations. The appointment of prominent digital asset supporter Kim Yong-beom as chief policy advisor by Lee Jae-myung further bolstered market confidence. A bill submitted by the ruling party this month has also fueled this trend, proposing to allow companies to issue won-backed stablecoins with a minimum capital requirement of only 500 million won. Critics warn that this could introduce issuers with insufficient capital strength, increasing systemic financial risks.

As one of the most active cryptocurrency markets in the world, South Korea saw a trading volume of stablecoins reach 57 trillion won in just the first quarter of this year, putting pressure on the Bank of Korea to accelerate the rollout of digital currency. Banks, brokerages, and fintech companies are actively positioning themselves in the stablecoin market but remain cautious about the impending regulations.

Bank of Korea Governor Lee Chang-yong has publicly expressed concerns over the issuance of stablecoins by non-bank institutions, believing it could impact capital flows and monetary policy. The Bank of Korea also warned in its 'June Financial Stability Report' released on June 25 that the widespread use of stablecoins as a payment method could pose financial risks, such as a 'coin run' phenomenon that could destabilize the financial system.

Reports indicate that the Financial Services Commission (FSC) of South Korea has submitted a roadmap to the Presidential Policy Planning Committee, recommending the approval of spot cryptocurrency ETFs. This move echoes the promise made by Lee Jae-myung during his campaign to advance the modernization of digital asset regulation and broaden market opportunities for young investors.

The plan proposes to promote the launch of spot cryptocurrency ETFs in the second half of 2025 and to establish a regulatory framework for won-backed stablecoins. In the past, the FSC has consistently blocked the rollout of cryptocurrency ETFs due to concerns over volatility and financial risks, deeming cryptocurrencies unsuitable as underlying assets.

Meanwhile, the differences in views on stablecoins between South Korea and the United States are becoming increasingly evident. South Korea focuses on achieving payment service innovation through 'won-backed stablecoins,' emphasizing faster and more efficient transactions in the economy.

In contrast, the United States believes stablecoins will play a key role in supporting the issuance of U.S. Treasury bonds, with an expected issuance volume reaching up to $1 trillion by the end of this year, and foreign media predict that stablecoin issuers will actively purchase them.

Tether, a major player in the stablecoin industry, has already held over $120 billion in U.S. Treasury bonds, ranking fifth among U.S. Treasury buyers, highlighting the increasing integration of stablecoins with the global financial system and the government securities market.