Bank of Korea Official Warns About Stablecoin Risks to Korean Currency

Lee Chang-yong, the leader of the Bank of Korea, recently expressed deep concerns regarding the plan to launch a stablecoin tied to the Korean won. This issue reflects the exponential growth of digital currencies and the new challenges faced by financial authorities across Asia. According to a report from NS3.AI, this statement comes amid increasing demand for stable digital payment alternatives.

Concerns About the Launch of Won-Linked Stablecoins

The main focus of the concern is the potential for capital control evasion that could arise from the presence of stablecoins based on the Korean currency. This phenomenon has become a serious concern for regulators, especially when observing the remarkable success of stablecoins pegged to the US dollar in the local market. Bank of Korea officials question whether launching similar won-based instruments could trigger destabilization in the financial sector.

Impact of Transaction Costs and Exchange Rate Volatility

Lee highlighted that US dollar-based stablecoins attract many users because they offer transaction fees that are significantly more competitive compared to traditional banking systems. However, he warned that fluctuations in the Korean won’s exchange rate against the dollar could create unhealthy market speculation opportunities. This volatility has the potential to negatively impact macroeconomic stability and public trust in the domestic financial system.

Regulatory Challenges in the Stablecoin Era

Another dimension emphasized is the complexity of regulation in the face of a wave of stablecoin issuance by non-bank entities. As more fintech companies and blockchain platforms launch their own digital currency products, the Bank of Korea faces the challenge of developing an effective regulatory framework that does not hinder innovation. Lee stressed that a delicate balance is needed between promoting financial technology and protecting the integrity of the national financial system.

This statement indicates that Korea, as a country with advanced fintech infrastructure, is beginning to adopt a cautious stance toward stablecoin expansion. The regulatory decisions to be made could serve as an important benchmark for other Asian countries in managing the dynamics of digital currencies.