Dr. Sangmin Seo, chairman of the Kaia DLT Foundation, points out that the Bank of Korea’s insistence that the banking sector take the lead in the deployment of won-denominated stablecoins lacks logic.
In a report published on Monday, the central bank argued that banks are already subject to strict regulations, including capital, foreign exchange and anti-money laundering requirements, which could help minimize risks associated with the domestic introduction of stablecoins.
At the same time, the Bank of Korea wants a policy consultation body jointly constituted by currency, foreign exchange and financial authorities to decide on issuer eligibility, issuance volume and other important considerations.
So told Cointelegraph that while he understands central banks’ concerns about the risks of stablecoins, the argument that banks will lead the rollout “seems to lack rationale.”
Clear rules for everyone is a good way forward: Seo
So argued that a better solution is to establish clear rules for stablecoin issuers that can “minimize financial risk and foster innovation.”
He said it would also allow both banking and non-banking institutions that meet these criteria to “compete and play to their strengths.”
“It would be even more valuable if the Bank of Korea could provide guidelines on how these risks can be mitigated and what qualifications an issuer needs to be considered reliable.”
In June, Bank of Korea Vice Governor Ryu Sandai proposed that Korean banks become the main issuers of domestic stablecoins to ensure a safety net, and then gradually expand to other areas.
Stablecoin yields are also prohibited.
The Bank of Korea also wants to ban interest payments on stablecoins, arguing that stablecoins directly compete with bank deposits and could disrupt the sector, and instead proposes promoting the commercialization of deposit tokens, which are digital tokens that represent deposits at banks and financial institutions.
Seo said a complete ban on stablecoin yields is an overreaching measure that could negatively impact and limit adoption.
“While I agree that stablecoins themselves should not include the ability to generate yield, I think it goes too far to limit the ability to generate additional yield through the use of stablecoins,” he said.
“To do so would severely limit its utility and adoption. Therefore, I think allowing supplementary yield generation should be allowed.”
South Korea’s stablecoin market is heating up
At least eight major South Korean banks announced plans in June to offer stablecoins pegged to the Korean won, with plans to issue them in late 2025 or early 2026.
Related: South Korea caps cryptocurrency loan interest rates at 20%, bans leveraged loans
Meanwhile, Naver Financial, the fintech arm of South Korean tech conglomerate Naver, is reportedly moving forward with plans to acquire Dunum, the operator of the country’s largest cryptocurrency exchange Upbit, and plans to launch a stablecoin project backed by the Korean won once the acquisition is complete.
South Korea’s cryptocurrency industry has benefited from a more favorable environment following the election of President Lee Jae-Myung in June, who is pushing for the enactment of various crypto-related laws, including a stablecoin legalization bill.
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