No, they do not. KRW stablecoins are, on the contrary, a strategic means to restore and maintain monetary sovereignty in a digital environment. Currently, the influence of dollar stablecoins is rapidly expanding in the domestic digital asset market, leading to a gradual loss of real-world use for KRW. For instance, as of 2024, the daily trading volume of dollar stablecoins on major domestic exchanges like Upbit and Bithumb has exceeded 20% of total trading, with weekly trading volume surpassing $1 billion. This change is not merely a shift in payment methods but a signal that the functional status of KRW is structurally weakening within the digital economic order. According to the Financial Services Commission, fund outflows to overseas exchanges increased more than threefold from 21.6 trillion KRW in the second half of 2022 to 74.8 trillion KRW in the first half of 2024, indicating that domestic digital asset transactions are occurring within a dollar stablecoin-centric foreign currency ecosystem, not a KRW-based system.
The digital asset ecosystem now demands a new order regarding how currency is designed, circulated, and trusted, beyond just the technical domain. KRW stablecoins are a policy tool that can restore the real-world usability and influence of the Korean Won within this order. In particular, to counter the unlimited spread of dollar stablecoins, a KRW stablecoin infrastructure issued and circulated within the institutional framework is absolutely necessary. Monetary sovereignty is not a declaration but a choice. For a currency to maintain its function, it must be actually used and chosen in the domestic and international digital environment. KRW stablecoins are precisely the starting point for restoring that real-world use base.
Some express concerns that the widespread adoption of KRW stablecoins could accelerate foreign currency outflow or reduce the use of KRW in trade settlements. However, this interpretation overlooks the reality of capital outflow through already rapidly diffused dollar stablecoins. On the contrary, KRW stablecoins are the only means to bring this flow into the institutional framework.
As previously examined, asset outflow from Korea to overseas exchanges via dollar stablecoins has rapidly increased in recent years, and this flow is not reflected in traditional foreign exchange statistics, making policy responses difficult. In particular, since dollar stablecoins function as the basic settlement unit on global exchanges, they can also be used for trade settlements or overseas remittances, potentially leading to actual KRW outflows. In such a situation, institutionalizing KRW stablecoins and establishing an issuance and redemption structure through authorized channels can actually contribute to foreign exchange market stability. If a design is introduced that allows real-time tracking of distribution information and linkage with the foreign exchange regulatory framework, it can help identify the causes of exchange rate fluctuations and enhance policy responsiveness.
Ultimately, rather than destabilizing the foreign exchange market, KRW stablecoins can serve as a policy tool to channel unofficial foreign currency flows into the institutional framework, thereby enhancing the transparency and coherence of foreign exchange statistics.
Current foreign exchange policy is designed on the premise of fund flows based on bank accounts, so digital asset movements via stablecoins like USDT are not captured in foreign exchange statistics. As mentioned earlier, overseas asset outflow mediated by dollar stablecoins has sharply increased in recent years, expanding the invisible fund flows within the foreign exchange market. This trend not only diminishes exchange rate policy responsiveness but also limits the ability to diagnose the causes of foreign exchange market instability. Such issues go beyond mere data deficiencies and act as structural elements that threaten the accuracy and alignment of policy design.
KRW stablecoins, through an authorized issuance structure and real-name account-based on/off-ramps, can bring distribution channels into the institutional framework. This allows for real-time tracking of foreign exchange transaction flows and linkage with AML and Foreign Exchange Transaction Act reporting systems, thereby strengthening policy monitoring and responsiveness. Especially, by providing an institutional KRW payment route for non-traditional foreign exchange demands such as Web3-based digital trade or overseas platform-based settlement instruments, it can enhance the comprehensiveness and alignment of foreign exchange statistics.
Ultimately, KRW stablecoins are not merely a transaction instrument. They can function as a policy infrastructure that makes foreign exchange policy practically operable in the digital asset era. They can also establish themselves as a foundational asset for expanding the Korean Won's distribution base into the global digital environment.
Some raise concerns that if KRW stablecoins become widespread, market liquidity could circulate outside the control of monetary authorities, thereby reducing the effectiveness of traditional monetary policy centered on the benchmark interest rate. However, these concerns are based on the premise of unregulated stablecoins and do not apply to the currently discussed asset-backed KRW stablecoin structure.
Capital market-type stablecoins can be monitored through the financial authorities' licensing and reporting framework concerning issuance volume, redemption size, and the composition of reserve assets. They will operate under a structure where the issuer, custodian, and distribution channels are distinctly separated. This approach is commonly adopted in stablecoin regulations in major countries, including the US (GENIUS Act), Europe (MiCA), and Japan (New Payment Services Act). The key is not whether stablecoins exist, but how they are designed and operated. If operated under a transparent and controllable design, they can even bring previously undetected liquidity into the institutional framework, thereby enhancing the precision of monetary authorities' policies. This aligns with the direction of the institutionalized KRW stablecoin structure proposed in this report. It can be designed to function complementarily with, rather than in conflict with, monetary policy.
Consequently, KRW stablecoins, rather than undermining the effectiveness of monetary policy, can become a new governance tool that enhances policy responsiveness and transparency in the digital environment.
CBDCs (Central Bank Digital Currencies) and stablecoins are both new currency infrastructures suited for the digital age, but they play fundamentally different roles in terms of structure and usability. CBDCs are directly issued by the Bank of Korea with the primary purpose of executing monetary policy and maintaining financial stability, while KRW stablecoins are privately issued under institutional regulation and are a private currency model that can be quickly applied to various use-centric environments.
CBDCs involve all transactions passing through the central bank system, posing policy dilemmas regarding personal information protection, transaction traceability, and potential deposit outflows due to interest payments. Furthermore, the period until commercialization, including technical verification and policy design, is long, leading to a dominant view that they have limitations in short-term market response. In particular, there are structural limitations in linking with private payment infrastructure or ensuring international interoperability.
Conversely, KRW stablecoins are easily linkable with existing financial infrastructure. They have a flexible structure that allows for immediate use in various commercial environments, including online and offline payments, global remittances, and digital asset transactions. The United States has put CBDC adoption on hold and adopted privately issued stablecoins as the de facto role of digital dollars. This can be seen as a strategy of first securing a real-world use base and then complementarily introducing a central bank-led model. Korea, too, is conducting CBDC pilot projects, but to solve pressing issues such as digital trade, capital outflow, and on-chain payments, private-sector KRW stablecoins are a more realistic solution. KRW stablecoins do not replace CBDCs. Instead, they can complement digital KRW infrastructure by first building a real-world use base.
While there is no precedent for the introduction of capital market-type KRW stablecoins in Korea yet, it is a fully feasible structure from both institutional and technical perspectives. Similar models are already being institutionalized in major global countries, and Korea also possesses the financial infrastructure and policy foundation to accommodate them. The core is not the technical feasibility itself, but the institutional design and policy will to support it.
Capital market-type stablecoins are premised on a structure where issuance volume, redemption size, and reserve asset composition are monitored in real-time. Issuers, custodians, and distribution partners, licensed and approved by financial authorities, share responsibilities by function. Reserve assets are limited to highly liquid assets such as bank deposits and government bonds, and issuer assets and reserve assets are clearly segregated for accounting purposes. These principles are commonly adopted in stablecoin regulations in the US (GENIUS Act), Europe (MiCA), and Japan (New Payment Services Act).
Furthermore, Korean financial institutions already possess the capabilities and licenses to perform related functions, such as custody, settlement infrastructure, and distribution channel operations. Indeed, a hybrid structure, like Circle's USDC, where issuing entities and financial institutions divide roles, is becoming a global standard.
Ultimately, capital market-type stablecoins are not an idealistic concept but a structure already institutionalized overseas and fully applicable in Korea. What is needed is the policy decision to concretize it, as the legal and technical foundations are already in place.
Some raise concerns that introducing KRW stablecoins before a clear regulatory framework is established is premature. However, major countries are proactively pursuing stablecoin regulations by simultaneously developing technology and institutional design, and Korea must keep pace with this trend.
In the US, the cloture (debate conclusion) vote for the GENIUS Act passed the Senate in May 2025, essentially overcoming its biggest legislative hurdle, with only the floor vote and House procedures remaining. The European Union has been implementing stablecoin-related provisions through MiCA regulation since June 2024, with the full regulation applying from December 2024. Japan has been implementing its revised Payment Services Act since June 2023, limiting stablecoin issuance to credible institutions such as banks, trust companies, and fund transfer service providers. Hong Kong passed its stablecoin bill in May 2025, introducing a licensing system and framework for Hong Kong dollar-based stablecoins. Korea also plans to include stablecoin-related provisions in Phase 2 legislation of the Digital Asset Framework Act, with major institutions like the Financial Services Commission, Bank of Korea, and Ministry of Economy and Finance participating in discussions.
What is needed now is not to postpone adoption due to regulatory deficiencies, but to proactively design what regulations will be created. A more realistic approach is to establish legal standards and technical requirements concurrently with pilot issuance. Stablecoins are an area where the simultaneous development of regulation and technology is essential. Instead of delaying introduction due to a lack of regulation, a real-world use base should be proactively formed to rapidly establish regulations.
Stablecoins operate on trust as a financial infrastructure. Therefore, if issuing entities proliferate indiscriminately or operate without reserve asset requirements, structural risks such as market trust erosion, redemption failures, and consumer harm can occur. Such concerns have materialized in cases of unauthorized and uncollateralized issuance, like the Terra incident, and are key elements that must be considered in stablecoin institutional design.
However, asset-backed KRW stablecoins are fundamentally designed on the premise of certain entry requirements and a responsibility structure. The US GENIUS Act prohibits issuance without federal authorization, and Europe's MiCA operates a registration-based issuance authorization system. Japan also grants issuance qualifications only to limited entities such as trust companies and banks. Korea can also clearly set issuance qualification requirements and reserve asset standards in a similar manner. For example, reserve assets can be limited to highly liquid assets, and if necessary, detailed requirements can be set by referring to short-term government bond standards presented in major countries like the US (e.g., maturity within 3 months). Additionally, re-collateralization or re-investment can be prohibited, certain capital requirements relative to the issuance amount can be imposed, and responsibility can be clarified by separating issuance, redemption, and asset custody functions.
This design does not arbitrarily limit the number of issuers. Instead, it allows market participation only for entities that meet clear standards. Multiple issuers meeting the same standards can exist, which can lead to increased market competitiveness and flexibility. The asset-backed model strictly controls entry but, within a structured framework, is premised on cooperation and functional division among issuers. Therefore, it is a structure that can secure both trust and diversity, rather than market confusion.
The Terra incident is a representative case that revealed the structural limitations of algorithm-based stablecoins, which relied solely on exchange mechanisms with a sister token (LUNA) without reserve assets. Terra's KRT did not guarantee 1:1 redemption, and the absence of reserve assets led to a rapid decline in value and the collapse of the entire system when market confidence was lost.
In contrast, the currently discussed KRW stablecoins are premised on an asset-backed (fiat-backed) structure. They hold highly liquid safe assets such as bank deposits and short-term government bonds as reserve assets. The design ensures that reserve assets of the same size as the circulating balance are maintained in real-time. Additionally, the issuer's assets and reserve assets are held in separate accounts, distinct for accounting purposes. Transparency is secured through external audits and daily reporting systems.
Functionally, issuance, redemption, and asset custody are not monopolized by a single entity. Instead, a structure is established where separate institutions handle each role. This design eliminates single points of failure and institutionally distributes responsibility and control for each function. Such a structure is commonly adopted in major stablecoin regulations like the GENIUS Act, MiCA, and Japan's New Payment Services Act. Therefore, asset-backed KRW stablecoins have a structure clearly distinguishable from the Terra incident, with risks mitigated from the design stage to prevent similar failures from recurring. The two models are fundamentally different systems in terms of collateral methods, risk diversification, and redemption stability, despite similar names.
Given that stablecoins are privately issued, concerns about potential customer asset loss in the event of issuer bankruptcy or insolvency are entirely valid. Accordingly, major countries' stablecoin regulations are designed to legally and clearly segregate issuer assets from customer assets, and reserve assets are managed through trust accounts or custodial institutions that are accounting-separated from the issuer's property.
In the case of asset-backed KRW stablecoins, reserve assets are generally held in bank trust accounts or by authorized custodial institutions. Customer assets are managed in an omnibus account, separate from the issuer's assets. This structure allows customers to exercise redemption claims on their stablecoins even in the event of issuer bankruptcy, and the recovery process can be institutionally guaranteed. Furthermore, reserve assets are composed of highly liquid assets like bank deposits or government bonds, designed to prevent delays in cash conversion upon redemption requests. Some overseas regulations mandate operation primarily with short-term government bonds (e.g., maturity within 3 months). Korea can also design regulations that reference such standards to simultaneously ensure the liquidity and stability of reserve assets. Along with this, re-collateralization or re-investment can be restricted, and external audits and daily disclosure systems can be operated to enhance reliability and transparency.
Ultimately, the key is not just the composition of reserve assets, but whether a system of distributed responsibility between the issuer and custodian and an accounting asset segregation system are institutionally established. If these conditions are met, customer assets can be safely protected even in the extreme situation of issuer bankruptcy, and trust in KRW stablecoins can also be secured.
Concerns have repeatedly been raised in various jurisdictions that if stablecoins become popular, existing bank deposits might shift to digital assets, leading to rapid redemption demands and potentially causing bank runs. The Bank of England has pointed out that if stablecoins are widely used, instability in redemption or failure to maintain 1:1 parity could lead to bank runs, which could undermine confidence in the entire financial system.
However, these concerns are mostly based on unauthorized models with opaque designs or a lack of regulation. Asset-backed stablecoins operated within the institutional framework are designed to legally and accounting-wise structure redeemability and liquidity, thereby complementing rather than undermining the stability of the financial system. Major countries commonly propose three structural principles: first, stablecoins must always be immediately redeemable at par value; second, reserve assets must consist only of highly liquid, low-risk assets; and third, the redemption function and asset management function must be separated, and customer assets must be clearly accounting-segregated from issuer assets. Additionally, policy mechanisms like prohibiting interest payments are also implemented to minimize the deposit-replacement function.
If Korea also incorporates these standards, stablecoins would not be risky assets that replace deposits or cause bank runs. Instead, they could be a complementary tool that enhances the efficiency and safety of the payment and settlement system. In particular, banks can expand their existing roles, such as providing on/off-ramp functions, participating as reserve asset custodians, and thus function as key partners in the stablecoin ecosystem.
As stablecoins proliferate as a payment method based on low fees and fast settlement speeds, concerns are raised that existing industries such as banks, card companies, and PG companies could be functionally replaced. In particular, some global fintech companies like Stripe are offering payment services at costs more than 30% lower than traditional card fees using stablecoins, acting as a factor that accelerates changes in the industry structure.
However, such changes are likely to lead to functional realignment and new collaboration models driven by technological evolution, rather than a complete replacement of existing industries. In fact, card companies, PG companies, and settlement agencies are attempting to adapt their systems by onboarding stablecoin-based payment services or linking offline payments with settlement back-office systems. Even in the case of banks, beyond their deposit-taking function, they can expand their roles in stablecoin on/off-ramps, reserve asset custody, and redemption clearing, which can lead to new revenue models. Especially if the issuance structure is institutionalized and a clear functional division of labor is established, existing industries will function as key partners within the ecosystem, rather than competitors.
Ultimately, stablecoins do not replace or threaten existing financial and payment industries. Instead, they are a technological means that demands the reorganization of functions and roles within the digital transformation trend, and can act as an opportunity to enhance industry productivity and scalability.
Concerns exist that stablecoins, being transferred on a blockchain and operating in a decentralized network, could be misused for money laundering (AML) or illegal overseas remittances if operated outside regulation. Indeed, there have been cases of high-value digital asset movements between wallets occurring outside the reporting framework of the Act on Reporting and Using Specified Financial Transaction Information and the Foreign Exchange Transaction Act, which has contributed to market distrust.
However, such risks primarily arise from unauthorized models operated outside regulation. Asset-backed stablecoins, operated within the institutional framework, allow for systematic control through an authorization system for issuers, reserve asset custody methods, and real-time reporting systems. For example, major jurisdictions such as the UK Financial Conduct Authority (FCA), the Monetary Authority of Singapore (MAS), and the New York Department of Financial Services (NYDFS) apply transaction monitoring systems for AML/CFT compliance and abnormal transaction detection to stablecoin issuers, or require them as an industry standard. Korea can also create a transparent distribution environment by combining Travel Rule, wallet/address-based tracking systems, and abnormal pattern detection technologies, based on the reporting frameworks of the Foreign Exchange Transaction Act and the Act on Reporting and Using Specified Financial Transaction Information. Related technologies are already commercialized through major domestic exchanges and blockchain analytics firms. If linked with institutional design, they can achieve a higher level of traceability and monitoring than cash.
Ultimately, the key is not the existence of risk, but rather the presence of institutions and technical infrastructure to manage it. Asset-backed stablecoins, within a permissioned structure, enable real-time monitoring and tracing. They actually have the potential to achieve a higher level of AML/CFT effectiveness than informal circulation methods.
Stablecoins are inherently blockchain-based assets and thus rely on private keys for asset access. This means that if a key is lost or stolen, asset recovery may be impossible. Such structural characteristics can act as a high barrier to entry for general users. In particular, for many users accustomed to financial services, a 'self-responsible security model' can be a psychological burden.
However, asset-backed KRW stablecoins operated within the institutional framework do not necessarily rely solely on such a structure. Through a Hosted wallet model, users do not need to directly hold their keys. Instead, institutional financial institutions or authorized service providers can custody keys on an authentication basis and provide recovery functions. The UK Financial Conduct Authority (FCA) and the Bank of England set basic requirements for wallet providers, such as legal and physical segregation of key storage, transaction monitoring, and asset recoverability in case of service disruption. In Korea, user-friendly hosted wallet services are already operated by exchanges and fintech companies holding Virtual Asset Service Provider (VASP) licenses.
Ultimately, the difficulty of private key management is a limitation of unregulated self-custody wallet models, not a structural problem of stablecoins themselves. Within institutionalized infrastructure, key security issues are a sufficiently solvable challenge. To expand real-world usage, it is necessary to provide both technical alternatives and policy designs in parallel.
Yes, they can. KRW stablecoins are not merely redeemable digital assets. They can function as a payment method that can be actually used in both real-world commerce and digital environments. Especially when issued on a public blockchain, they can expand the scope of digital payment infrastructure by linking with blockchain-based systems, unlike existing simple payments or card payments.
Existing KRW payment methods operate based on bank accounts or internal platform points, which limits their technical connectivity with blockchain-based Web3 services or the global digital ecosystem. In contrast, KRW stablecoins issued within the institutional framework have on/off-ramps linked to real-name accounts and can be connected to various payment environments. This gives them the potential to be used in commerce as a practical 'digital KRW'.
Furthermore, existing payment infrastructure providers such as card companies, PG companies, and banks can also participate in stablecoin-based payment systems. This enables linkage with new technological environments based on the reliability and user accessibility of existing industries. Such a structure demonstrates that stablecoins can function by complementing existing payments rather than replacing them.
Ultimately, KRW stablecoins possess the practicality to be directly used as a payment method in commerce. They can become a core infrastructure that expands the real-world use base of KRW in a way suitable for the digital environment.
