Written by: Four Pillars
Translated by: Tim, PANews
Key Points:
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What is the current state of the development of the Korean won stablecoin? Let’s analyze the positions and latest moves of the Korean government, parliament, and business community.
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The essence of stablecoins can be summed up as a "game of net inflows and net outflows." Blockchain technology expands the inclusiveness of financial services, but for governments and enterprises, the core issue is whether this enhanced inclusiveness will attract more capital inflows or lead to more capital flight. All policies and strategies must be formulated based on this projection.
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Within this "net inflow and net outflow" framework, the Korean won stablecoin is a thorny issue for both policymakers and businesses. However, the global financial system has already begun to tilt toward blockchain. If Korea hesitates, it risks being left far behind in the wave of financial innovation.
1. Lengthy Legislation Process
Currently, Korea has proposed five independent bills related to the Korean won stablecoin. Lawmakers Min Byung-deok, Ahn Doo-chul, Kim Hyun-jung, and Lee Kang-il from the ruling Democratic Party have submitted proposals. Kim Eun-hye, a lawmaker from the opposition People Power Party, has also put forward a bill. Although the general frameworks of the five drafts are similar, there are differences in details, such as issuer qualifications, whether interest payments are allowed, and collateral requirements.
In addition to lawmakers’ bills, the Financial Services Commission (FSC), a Korean government agency, is also preparing to launch the second phase of digital asset regulations, which will include stablecoin regulatory provisions. Since the FSC will ultimately have the highest regulatory authority over stablecoins pegged to the Korean won, the industry is closely watching its soon-to-be-released regulatory draft.
Unlike the United States, in Korea, if the legal framework for a financial product has not yet been established, companies can hardly conduct any business in practice. Therefore, for businesses, the most critical issue is when the Korean won stablecoin legislation will actually pass.
According to the legislative activity report of Korea’s 21st National Assembly, the average time for government proposals to pass is 435.2 days, while the average processing time for lawmakers’ proposals is 657.1 days. The stablecoin bill that the Financial Services Commission plans to submit in October 2025 falls under the category of government proposals. Even counting from that point, the actual implementation of the Korean won stablecoin legislation is likely to wait until early 2027. This means that before then, Korean companies and even foreign blockchain projects will hardly be able to advance concrete business plans.
2. Favoring Private Blockchains
From the beginning, we have advocated that for Korea’s blockchain industry to truly develop, the Korean won stablecoin must be issued on public chains such as Ethereum or Solana. But at present, this vision seems difficult to realize.
The two public institutions expected to be responsible for regulating the Korean won stablecoin are the Financial Services Commission and the Bank of Korea. The Bank of Korea’s position is clear: there is a need to launch a Korean won stablecoin, but there is no reason to rush. They prefer to start with private blockchains and expand gradually. The newly appointed chairman of the Financial Services Commission even stated that Korea should build its own customized blockchain and issue stablecoins on that basis.
Their position is not without reason. Unlike the US dollar stablecoin, the Korean won stablecoin faces high entry barriers from foreign exchange regulations and the risk of capital flight. From the perspective of national economic management, issuing a Korean won stablecoin directly on a public chain is indeed difficult to control.
Korea is one of the few countries in the world that does not rely on Visa and Mastercard for domestic payments, but prefers to use its own payment systems. The country is still deeply affected by the trauma of the 1997 foreign exchange crisis. Therefore, regulators are more inclined to keep the economy within a predictable range. From this perspective, the Korean won stablecoin is highly likely to be launched on a private chain rather than a public chain first.
For those who support the development of Korea’s blockchain ecosystem, this direction is disappointing. But even so, domestic system integrators and global blockchain foundations can still find opportunities in it.
Korean domestic system integration companies are expected to undertake blockchain construction projects tailored for stablecoin issuance with Korean characteristics. A clear example is LG CNS, the IT services subsidiary of the LG Group, which built the blockchain infrastructure for the Bank of Korea’s central bank digital currency pilot.
Public chain projects can still provide technical support for private networks that handle the issuance and participation in the distribution of the Korean won stablecoin. Avalanche subnets and Arbitrum Orbit are typical examples. Any team with experience in building and operating large public chains should be able to easily customize such solutions for Korea.
The utility of stablecoins mainly comes from their existence on public networks. To make the Korean won stablecoin competitive, it must either be built on a public chain from the start, or, if restricted by political factors, must eventually expand to a public chain.
If issuance is limited to private networks, then the only possibility for the success of a Korean-style blockchain is: a state-operated private network must be established, and all financial services—stablecoins, tokenized assets, platform points, etc.—must be connected to this network.
From a technical perspective, this model will maintain privacy, but for Korean citizens and the domestic market, it can simulate the user experience of a public chain. With one wallet and one Korean won stablecoin, users can integrate remittances, payments, stock trading, and cryptocurrency trading on one platform. This seems to be the only way to simultaneously meet the needs of the government, the blockchain industry, and users.
Will the Korean won stablecoin be allowed to be issued on a public chain? We can only wait and see. But the worst-case scenario is clear: multiple private networks emerge in Korea, fragmenting the financial system.
3. Enterprises in Wait-and-See Mode
Almost every day, Korean media headlines report a company applying for a Korean won stablecoin trademark or another company considering launching a stablecoin business. But from the outside, the reality seems quite different. In Korea, companies’ attitudes toward the Korean won stablecoin are divided into two camps.
The first camp is the proactive group. Generally, the smaller the company, the more proactive its attitude toward launching a Korean won stablecoin business. There are multiple reasons behind this: compared to large conglomerates, small companies face less regulatory risk, and given the topic’s popularity, entering the stablecoin field can also generate significant PR effects.
But the problem is: stablecoins are a business of economies of scale. On the issuance side, success requires expanding supply to build high liquidity and network effects. On the circulation side, it requires attracting a large number of users and merchants to create actual utility. Small companies can enter the market, but will encounter bottlenecks in scalability. Their best opportunities are not in the core issuance or circulation links of the value chain, but in the surrounding service areas.
The second camp is the cautious group. The larger the company, the more likely it is to remain on the sidelines and take an extremely cautious stance. This caution is mainly due to two reasons: first, legal uncertainty. As mentioned earlier, the legislative process for Korean won stablecoin regulatory laws is expected to take one and a half to three years. In the Korean market environment, it is almost impossible for large companies to proactively launch stablecoin services before the regulatory framework is established.
The second reason is commercial viability. Unlike US dollar stablecoins, which serve a vast global market, the Korean won stablecoin is essentially a domestic market product. For large companies that have already succeeded in domestic financial business, the actual benefits brought by switching to blockchain and stablecoins may not be attractive enough.
4. Korea’s Short-Term Bond Market Is Small: Is Collateralized Stablecoin Issuance Possible?
Tether, the issuer of USDT, holds 130 billions of dollars in US short-term Treasury bills and repurchase agreements. Circle, the issuer of USDC, holds 63 billions of dollars in money market funds. In contrast, Korea does not issue government bonds with maturities of less than one year. The government occasionally issues Treasury financing bonds to meet temporary funding needs, but their total size is only about 7 billions of dollars.
This means that the short-term bond market that can serve as collateral for the Korean won stablecoin is too small, constituting a fundamental obstacle to issuance. Recently, the Korea Capital Market Institute proposed the idea of issuing short-term government bonds specifically for stablecoin issuance, but the Bank of Korea immediately refuted this, warning against the idea and suggesting that monetary stabilization bonds could be used as an alternative.
These bonds, issued by the central bank to absorb market liquidity, usually have maturities of less than three years, some as short as three months, and their total size is considerable, making them a potential alternative. But even so, the market size is still not large.
In addition to size, whether government bonds or stabilization bonds, there is another issue as collateral: yield. The average yield on US short-term bonds is around 4%, while the yield on Korean government and stabilization bonds is only slightly above 2%. For issuers, this lower yield greatly weakens the incentive to operate a Korean won stablecoin business, especially since the issuance scale is already much smaller than that of US dollar stablecoins.
5. Other Misconceptions About the Korean Won Stablecoin
There are also some misconceptions in the Korean market about the Korean won stablecoin that need to be corrected.
First, the risks of issuing stablecoins on public networks have been exaggerated. Even if the Korean won stablecoin is issued on a public chain, rules defined by regulators and issuers can still be enforced directly through smart contracts. For example, transactions can be restricted to Korean users who have completed real-name authentication. Securitize has already demonstrated the feasibility of this model with tokenized securities such as BUIDL, which fully meet regulatory requirements through smart contract logic. This means that the Korean won stablecoin can circulate on public networks while allowing regulators to fully monitor capital flows and prevent unforeseen situations.
The second misconception is that, as a highly developed financial market, adopting the Korean won stablecoin brings little improvement to user experience. This view is only half correct. Indeed, Korea’s fintech infrastructure is very advanced, and users can already easily access various financial services through multiple platforms. From this perspective, blockchain-based stablecoins will not bring a huge leap in convenience, but they will bring several important advantages:
Cross-platform interoperability: Today, financial services are not only fragmented across platforms such as Naver, Kakao, Toss, and Upbit, but even within functions such as remittances, stock trading, cryptocurrency trading, and payments. Blockchain and stablecoins can connect these islands, providing users with a highly integrated experience.
Micropayments: In the current financial system, high fees make small transactions difficult. Blockchain and stablecoin technology provide a solution. Imagine paying only for the minutes you actually watch on a streaming platform, or earning proportional revenue based on the amount of ads you view—a micropayment economy could flourish as a result.
Lowering fees: This may not please card issuers and payment networks, but in an ideal stablecoin payment system, they are simply unnecessary. Each transaction fee could be reduced by 1% to 2%. For high-frequency trading businesses, this means a significant rebound in profits, a considerable portion of which would be passed on to consumers in the form of new benefits.
6. The Essence of the Issue: The Game of Net Inflows and Outflows
The discussion around the Korean won stablecoin ultimately boils down to a game of net inflows and net outflows. We are in an era where financial back-end systems are highly fragmented—different continents, different countries, and even banks, payment networks, and securities settlement systems within the same country are all fragmented.
Blockchain has the ability to integrate all of this into a unified system. Today, stablecoins and RWA are hot topics in the US precisely because people are pushing to use blockchain to replace outdated financial systems. In the grand trend of financial technology development, blockchain has become the general direction.
If blockchain can integrate multiple financial systems, the result will be greater accessibility. Korean users can pay for services in Nigeria with Korean won, Vietnamese users can buy Korean content with Vietnamese dong, and Americans can spend Rakuten points. On the blockchain, anything is possible.
This improvement in accessibility is exactly what governments and businesses must consider: will launching a Korean won stablecoin bring more capital inflows to the country and platforms, or will it lead to more capital outflows? For the US, the answer is obvious. The dominance of the dollar means more capital inflows, so US dollar stablecoins receive full support. But for Korea, the trade-off is more complex. Companies also need to consider: will opening products to the world bring more benefits than drawbacks, or will it be a losing proposition?
From this perspective, people can begin to judge whether the Korean won stablecoin business is helpful or harmful.
7. Top-Down Adoption Path
Korea is a financial powerhouse. In countries with unstable currencies, there is a natural bottom-up motivation for the public to adopt stablecoins. But in Korea, users have almost no reason to switch to using the Korean won stablecoin on their own.
If the government or businesses really want to introduce stablecoins, they must cleverly embed them into back-end systems. Users don’t even need to be aware of the existence of stablecoins to enjoy the new features they support.
For example, overseas remittances could become more convenient. Cross-platform payments could be seamlessly integrated. Platform points could be more easily exchanged. Subscription models based on micropayments could emerge. All of these can be achieved top-down through stablecoins and blockchain back-end technology.
If exchanges replace the Korean won with the Korean won stablecoin, users will adopt it accordingly. If fintech giants like Naver, Kakao, or Toss adopt the Korean won stablecoin option and add incentives, users will adopt it accordingly. If streaming platforms launch micropayment systems based on the Korean won stablecoin, users will adopt it accordingly.
8. What Is the Outlook for the Korean Won Stablecoin?
After months of conversations with public institutions, financial institutions, and enterprises, I have never encountered any participant with a clear sense of purpose or a concrete plan for the Korean won stablecoin. Frankly, this is because even if the Korean won becomes more accessible through blockchain technology, its value proposition is still not clear enough.
However, I believe Korea must move forward. In the US, the government, the Securities and Exchange Commission, and the Commodity Futures Trading Commission are fully promoting the development of blockchain technology. The banking industry, payment systems, and securities infrastructure are gradually being replaced by blockchain technology, and this trend means that the global shift from outdated back-end systems to blockchain is only a matter of time.
The launch of the Korean won stablecoin is already late. But if, as current discussions suggest, Korea waits until 2027 to launch it on a private chain, it will be far behind the pace of global development. In this tough stablecoin competition, the real question is whether Korea can still formulate a meaningful development direction.
