Stablecoin Fear Spreads: South Korea’s Central Bank Warns of Depeg Threat, Urges Bank Safeguards

South Korea’s central bank has issued a stark warning over the growing risks of won-pegged stablecoins, cautioning that private issuers could threaten monetary stability if safeguards are not ￰2￱ Bank of Korea (BOK) said in a new report titled “Currency in the Digital Age: Harmony of Innovation and Trust” that the rapid expansion of stablecoin activity poses systemic vulnerabilities, including potential depegging events and illicit capital flows.) while ensuring full redemption ￰3￱ Korea’s ruling Democratic Party has introduced the Digital Asset Basic Act to legalize stablecoin issuance. #SouthKorea #CryptoRegulations #Stablecoins ￰0￱ — ￰4￱ (@cryptonews) June 10, 2025 The bill, backed by President Lee Jae-myung’s pro-crypto administration , seeks to increase transparency and competition in the local digital asset market.

However, the Bank of Korea has consistently opposed letting non-bank entities issue won-pegged ￰5￱ the time, Governor Rhee insisted that any digital currency backed by the won should remain under the central bank’s purview. “Allowing private companies to issue won-denominated stablecoins without adequate supervision could weaken monetary control,” Rhee said earlier this ￰6￱ Stablecoin Race Is On — and Korea’s Banks Aren’t ￰7￱ central bank opposition, commercial banks have been preparing for a gradual ￰8￱ June, eight major banks, including KB Kookmin, Shinhan, Woori, and Nonghyup, formed a consortium to develop a joint won-linked ￰9￱ consortium plans to pilot two issuance models: a trust-based system, where customer deposits are held separately as reserves, and a deposit-linked system, where stablecoins mirror customer deposits on a one-to-one ￰10￱ banks say the initiative aims to “secure independence and competitiveness” amid fears that foreign dollar-backed stablecoins could dominate the domestic ￰11￱ consortium’s creation marks a shift in South Korea’s financial sector, which has historically maintained distance from digital ￰12￱ executives privately acknowledge a “shared sense of crisis” that foreign dollar-pegged stablecoins could dominate the domestic market if local issuance lags behind.

Meanwhile, the Financial Intelligence Unit (FIU) is restructuring its anti-money laundering (AML) protocols to address the upcoming “institutionalization” of ￰13￱ agency has commissioned research on risk mitigation and is drafting new AML guidelines for stablecoin issuers to be completed by ￰14￱ said the findings will form the foundation for updated oversight rules under the amended Specific Financial Information Act next ￰15￱ Korea’s Stablecoin Bills Stall in Parliament as Agencies Vie for Control Notably, the government is also tightening coordination across ￰16￱ President Lee previously proposed dismantling the Financial Services Commission (FSC), it remains active in crypto oversight and is expected to serve as the main licensing authority for KRW-pegged ￰17￱ bills from both ruling and opposition lawmakers would give the FSC power to approve issuers, enforce redemption standards, and impose emergency orders in case of market ￰18￱ debate has slowed progress, ￰19￱ separate draft bills are stalled in the National Assembly as lawmakers and regulators clash over whether fintech and IT firms should be allowed to issue ￰20￱ BOK argues that such permission could lead to the emergence of “private currencies” controlled by large tech conglomerates like Naver and Kakao, potentially challenging the central bank’s monetary ￰21￱ the gridlock, the stablecoin sector continues to attract global ￰22￱ Bank of Korea, South Korea’s central bank, is still lukewarm on proposals to launch a won stablecoin despite a recent meeting with the USD Coin (USDC) issuer Circle. #SouthKorea #Stablecoins #USDC ￰1￱ — ￰23￱ (@cryptonews) June 19, 2025 In August, Circle CEO Heath Tarbert met with Governor Rhee and executives from major Korean banks and crypto exchanges to discuss cooperation on stablecoin infrastructure and regulatory frameworks.

Also, Solana Foundation partnered with Korean blockchain infrastructure company Wavebridge to build a “compliance-ready” KRW-pegged ￰24￱ debate unfolds against a backdrop of declining domestic crypto ￰25￱ to the BOK’s Financial Stability Report, the Korean crypto market lost nearly $24 billion in value in the first half of 2025 , with daily trading volumes falling 80% to 3.2 trillion ￰26￱ investors have shifted to local equities amid stronger currency performance and growing regulatory uncertainty.