Bank of Korea governor backs cautious stablecoin rollout

The Bank of Korea’s Governor has voiced his support for a won-denominated stablecoin, but only if it is issued by banks. The South Korean administration appears to be changing its attitude toward cryptocurrency. However, the country is taking a cautious approach.

Bank of Korea (BOK) Governor Lee Chang-yong has voiced cautious support for the development of won-denominated stablecoins. However, he also stressed that the stablecoin rollout should be led by banks rather than non-bank companies.

Bank of Korea’s Governor wants banks to lead stablecoin rollout

Speaking before the National Assembly’s Planning and Finance Committee on August 19, Lee highlighted both the potential benefits and the significant risks associated with rolling out a stablecoin tied to the Korean won.

Lee said it is “necessary to have won stablecoins to add program functions to the currency in the future,” but emphasized that expansion should be “gradual” and guided by safeguards.

He also stressed the risk of money laundering and the potential disruption to the bank-centered financial system if large non-bank companies were allowed to issue stablecoins.

“In order to prevent money laundering problems, only large companies of a certain size or more with systems such as KYC (customer identity verification) should be allowed to issue,” Lee argued. He warned that allowing large technology or non-bank firms into the space could alter the structure of the financial system in unpredictable ways.

Lee likened such an arrangement to creating payment banks with limited banking functions but without lending capacity, which could drain deposits from traditional banks and reduce their profitability. This, in turn, could weaken the broader banking sector’s ability to support economic activity.

Lee also mentioned concerns about wealthy South Koreans moving won deposits abroad via overseas platforms such as Binance if won-backed stablecoins were issued without restrictions.

“As much as capital regulation can be completely avoided, this problem should be seriously considered,” he said.

Implications of won-backed stablecoins on the economy

Currently, the central bank manages liquidity through tools such as the reserve requirement ratio, which regulates how much banks must hold in reserves. If non-bank institutions were to issue won stablecoins, reducing liquidity through bond sales might not be as effective or swift.

“For example,” Lee explained, “when you are asked to sell government bonds as collateral to non-bank financial institutions that issued won stablecoins to reduce the amount of money, it may not be executed quickly and sufficiently.”

The governor also questioned the demand for a won stablecoin, as 99% of global stablecoin activity is dollar-based.

“We are skeptical about whether the demand for dollar stablecoins will decrease if we issue won stablecoins in this situation,” he said.

In Korea, the use case for stablecoins is further limited because virtual assets remain heavily restricted. “In foreign countries, stable coins are mainly used to trade virtual assets, but in the case of Korea, virtual assets are not allowed at all,” Lee said.

Some ruling party lawmakers argued that collateralized issuance of stablecoins with government bonds could prevent liquidity risks or “coin runs,” but Lee disagreed. He stressed that even if deposits overall remain constant, liquidity could still be strained if retail deposits shift into institutional accounts.

“That’s why the currency authorities should enter the stablecoin licensing process and prepare a safety plate,” he said. “Even if you hold government bonds as collateral, if the issuer’s credit status is unstunt, there is no reason for the holder to have trouble with the issuer’s stablecoin as it is, so coin runs can happen.”

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