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

Odaily According to Lee Chang-yong, speaking at the Asian Financial Forum in Hong Kong, due to market pressure, Korean authorities have allowed domestic residents to invest in virtual assets issued overseas. Financial regulatory authorities are 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 is introduced, its primary use may be concentrated in cross-border transactions, while tokenized deposits are more suitable for domestic payment scenarios. However, he emphasized that there is still significant controversy surrounding stablecoins. The core concern is whether Korean won stablecoins could 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 significantly lower than using US dollars directly. When exchange rate fluctuations cause changes in market expectations, funds may rapidly flow into US dollar stablecoins, leading to large-scale capital transfers. At the same time, the participation of numerous non-bank institutions in stablecoin issuance has significantly increased regulatory difficulty.

Additionally, Lee Chang-yong noted that South Korea itself has a highly developed fast payment system, so 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.