South Korea Considers Allowing Domestic Institutions to Issue Virtual Assets, Stablecoins Remain Controversial

Odaily News: Lee Chang-yong stated at the Asian Financial Forum in Hong Kong that, in response to market pressures, Korean authorities have already permitted domestic residents to invest in virtual assets issued overseas. Financial regulatory bodies are now considering establishing a new registration system to allow domestic institutions to issue virtual assets.

Lee Chang-yong pointed out that if a Korean won-denominated stablecoin were to be launched, its primary use might be concentrated in cross-border transactions, while tokenized deposits would be more suitable for domestic payment scenarios. However, he emphasized that there is still significant controversy surrounding stablecoins. The core concern is whether a Korean won stablecoin could potentially be used to circumvent capital flow management, especially when used in conjunction with US dollar stablecoins.

He further stated that US dollar stablecoins have a wide range of applications and low barriers to entry, with related transaction costs being significantly lower than using US dollars directly. When exchange rate fluctuations trigger changes in market expectations, funds could rapidly flow into US dollar stablecoins, causing large-scale capital transfers. Simultaneously, the participation of numerous non-bank institutions in stablecoin issuance has also significantly increased regulatory difficulty.

Additionally, Lee Chang-yong noted that South Korea itself possesses a highly developed fast payment system, therefore the advantages of a retail central bank digital currency (CBDC) are limited. Currently, the central bank is advancing tokenized deposits and wholesale CBDC through multiple parallel pilot projects to maintain the existing two-tier financial system.