Market News

South Korea's Central Bank Open to Won-Based Stablecoin as Forex Concerns Linger

The head of South Korea’s central bank has indicated a potential openness to issuing a won-based stablecoin.

Bank of Korea Governor Rhee Chang-yong expressed concerns about how such a token could complicate the management of foreign exchange.

He noted that a won-pegged stablecoin might lead to an increased demand for dollar stablecoins, which presents challenges in forex management.

This announcement aligns with South Korea's ongoing progression towards regulating cryptocurrencies under newly elected President Lee Jae-myung's administration.

Current forex reserves in South Korea have seen a notable decline, dropping from $415.6 billion in December to $404.6 billion by May.

Under the proposed Digital Asset Basic Act, companies with significant equity could issue stablecoins, contingent on maintaining adequate reserves and receiving regulatory approval.

The Financial Services Commission is currently overseeing local exchanges and their transaction fees, part of efforts to minimize costs for young investors.

Stablecoins primarily backed by the US dollar currently dominate the market, with Tether and USDC leading in market capitalization.

Meanwhile, Circle’s euro-pegged stablecoin, EURC, is witnessing rapid growth, increasing its market cap by 156% this year.

As regulatory frameworks develop, South Korea's potential stablecoin issuance could reshape its participation in the global digital economy.