Won Stablecoin Bill Reaches Critical Finalization as South Korean Regulators and Ruling Party Clash Over Issuer Control

SEOUL, South Korea – January 14, 2025 – South Korea’s financial landscape stands at a pivotal juncture as the ruling Democratic Party and national financial authorities prepare for a decisive closed-door meeting on January 20. The agenda is singular and significant: to finalize the long-anticipated Digital Asset Basic Act, specifically the framework for a government-backed won stablecoin. This legislative push, aiming for enactment by March 2025, represents a monumental step in the nation’s strategy to harness blockchain technology while ensuring market stability. However, a fundamental clash over issuer eligibility threatens to define the future of digital finance in Asia’s fourth-largest economy.

The Core Conflict in the Won Stablecoin Bill

According to a January 14 report by DataNews, the central point of contention revolves around who will have the right to issue the proposed Korean won-pegged stablecoin. Financial authorities, including the Financial Services Commission (FSC) and the Bank of Korea, advocate for a conservative, stability-first model. Consequently, they propose granting initial issuance rights exclusively to consortiums where a licensed bank maintains a majority stake exceeding 50%. This structure, regulators argue, leverages the existing trust, capital adequacy, and stringent oversight of the traditional banking sector to mitigate the volatility and systemic risks associated with digital assets.

Conversely, the Democratic Party’s digital asset task force expresses strong opposition to this bank-centric model. Party officials and affiliated experts caution that such a requirement could stifle innovation, create an oligopoly, and contradict the decentralized ethos of blockchain technology. They advocate for a more inclusive framework that could allow non-bank financial institutions or regulated fintech companies to participate as issuers under strict conditions. This philosophical divide sets the stage for intense negotiations at the January 20 meeting, where a final agreement is expected to be forged.

Historical Context and Global Precedents

South Korea’s move to legislate a sovereign stablecoin follows a global trend but is driven by unique domestic pressures. The nation is a global cryptocurrency powerhouse, with one of the highest rates of retail adoption. Following the Terra-LUNA collapse in 2022, which devastated Korean investors, regulators intensified their focus on consumer protection and market integrity. The Digital Asset Basic Act itself is a comprehensive legislative package, of which the stablecoin provision is a cornerstone, designed to provide legal clarity for exchanges, custody, ICOs, and now, fiat-referenced tokens.

Globally, other jurisdictions offer contrasting models. For instance, Japan permits licensed banks and registered money transfer agents to issue stablecoins. The European Union’s Markets in Crypto-Assets (MiCA) regulation allows both credit institutions and electronic money institutions (EMIs) to issue significant “e-money tokens.” The U.S. approach remains fragmented, with state-level trust charters and ongoing federal legislative debates. South Korea’s deliberation between a strict bank-led model and a more flexible approach directly mirrors this international regulatory experimentation.

Expert Analysis on the Bank Consortium Requirement

Financial stability experts largely support the regulators’ cautious stance. “Integrating stablecoins with the traditional banking system is the most effective way to manage liquidity risks and ensure redeemability at par,” explains Dr. Min-ji Park, a professor of fintech law at Seoul National University. “A bank holding a majority stake provides a direct link to central bank reserves and payment systems, which is crucial for maintaining the peg during market stress.”

However, blockchain industry advocates highlight potential drawbacks. “Mandating bank control could slow adoption and innovation,” argues Kim Jae-won, head of the Korea Blockchain Industry Promotion Association. “It risks creating a walled garden where only a few large financial conglomerates can participate, potentially limiting the competitive benefits and financial inclusion goals of digital assets.” This expert dichotomy underscores the high-stakes balance the legislation must achieve.

Potential Impacts on South Korea’s Digital Economy

The outcome of the January 20 meeting will have immediate and long-term ramifications. A bank-led won stablecoin could:

• Accelerate Institutional Adoption: Provide a trusted, regulated digital asset for corporate treasury management and cross-border settlements.
• Strengthen the Won’s Digital Presence: Counter the dominance of the US dollar-pegged stablecoins (USDT, USDC) in domestic crypto trading pairs.
• Enable New Financial Products: Facilitate the development of decentralized finance (DeFi) protocols with a compliant, Korean won-denominated base asset.

Conversely, a more open model might foster greater competition and innovation but could face tougher scrutiny regarding operational resilience and consumer protection safeguards. The timeline for implementation remains ambitious, with the government targeting legislation by March 2025, suggesting that the technical and operational frameworks are already in advanced stages of development behind the scenes.

Conclusion

The January 20 meeting between South Korea’s ruling party and financial regulators represents a definitive moment for the nation’s won stablecoin future. The resolution of the issuer eligibility debate will not only shape the Digital Asset Basic Act but also signal South Korea’s broader philosophy toward integrating traditional finance with the digital asset ecosystem. Whether a conservative bank-consortium model prevails or a more hybrid approach emerges, the decision will establish a critical precedent for regulatory frameworks worldwide. The world will be watching as South Korea finalizes a bill that could become a blueprint for sovereign digital currency innovation.

FAQs

Q1: What is the main purpose of South Korea’s proposed won stablecoin?
The primary purpose is to create a safe, regulated, and Korean won-pegged digital asset to enhance market stability, provide consumer protection following past crypto collapses, and foster innovation in blockchain-based financial services within a clear legal framework.

Q2: Why do financial regulators want banks to control the stablecoin issuance?
Regulators prioritize financial stability. Banks are already subject to rigorous capital, liquidity, and anti-money laundering regulations. By requiring a bank-led consortium, authorities aim to anchor the new digital asset to the trusted, resilient traditional financial system to prevent runs and ensure 1:1 redeemability.

Q3: What is the Democratic Party’s alternative proposal?
While details from the task force are not fully public, their opposition suggests a preference for a model that allows non-bank, but still heavily regulated, entities (like large fintechs or securities firms) to become issuers. This aims to promote competition and prevent excessive concentration of power in the banking sector.

Q4: How does this compare to stablecoin regulation in other countries?
South Korea’s debate mirrors global discussions. The EU’s MiCA regulation allows both banks and electronic money institutions. Japan also licenses banks. The U.S. lacks a unified federal law. South Korea’s potential bank-majority rule is among the most conservative and stability-focused approaches being considered by a major economy.

Q5: When could a Korean won stablecoin actually launch?
The government’s goal is to pass the Digital Asset Basic Act, including the stablecoin provisions, by March 2025. After enactment, there would be a period for detailed rule-making and issuer licensing. Therefore, a live, regulated won stablecoin could potentially launch in the latter half of 2025 or early 2026, depending on the implementation timeline.