This article is excerpted from the 'The Necessity of KRW Stablecoins and Proposal for a Legislative Framework' report co-authored by Hashed Open Research and Four Pillars. The full report can be found at Four Pillars.
Trump's Pro-cryptocurrency Policy
Recently, the Trump administration has explicitly affirmed its commitment in sustaining a pro-cryptocurrency policy stance. Throughout the election campaign, Trump committed to an extensive array of pro-crypto initiatives, including designating the United States as the "Crypto Capital," easing regulatory constraints, replacing the Chairman of the U.S. Securities and Exchange Commission (SEC), and extending comprehensive support to the industry. These pledges should not be misconstrued as mere electoral stratagems or reactive measures against the prior administration. Since assuming office, the administration has reinforced its pro-crypto agenda through targeted executive orders and strategic personnel appointments. Recent appointment of David Sacks as the "Crypto and AI Czar," entrusted with overseeing both artificial intelligence and cryptocurrency policies, exemplifies this resolute commitment.
These policy directions need to be understood in the context of the global economy and macroeconomics, not just as attempts to foster specific industries. Cryptocurrency is progressively becoming deeply intertwined with macroeconomic aspects, including U.S. international trade strategy, demand for Treasury securities, competition for hegemonic influence, and maintaining global leadership.
The Risk of a Fiscal Crisis in the United States, and Need of an Alternative Reserve Asset
The United States faces the looming threat of a severe fiscal crisis, with its debt-to-GDP ratio surging to 120%—the highest level since World War II. In its year-end Article IV report for 2024, the IMF raised concerns about the fiscal sustainability of the U.S. Moreover, as the debt-to-GDP ratio continues to climb, the likelihood of a so-called "Truss Moment" in the bond market intensifies, where a sudden upheaval could trigger a sharp rise in Treasury yields, thus causing bond issuance failure.
Such an event could be viewed as a signal from the bond market's vigilantes, reacting to unsustainable government debt levels and urging policymakers to suspend tax reductions or curtail public expenditure. Conversely, excessive fiscal restraint risks inciting significant political upheaval and stoking reactionary populism. As a result, a thorough investigation into the underlying causes of these challenges and forming robust solutions are paramount.
As noted by Lyn Alden in her book Broken Money, thus far, society has postponed addressing current issues at the cost of future stability, but we have now arrived at a reality where problems can no longer be deferred, underscoring that the U.S. fiscal crisis has emerged as an urgent and inescapable priority.
Stephen Miran, current chair of the Council of Economic Advisers(CEA), published A User's Guide to Restructuring the Global Trading System in November 2024 while at Hudson Bay Capital. Current U.S. tariff policy aligns with the arguments presented in the report. This report states that the United States should aim to reduce its fiscal deficit, revitalize manufacturing, and weaken the dollar to address the "Triffin Dilemma," a structural contradiction in the international monetary system. The core issue confronting the modern international monetary system stems from the structural inconsistency in the supply of the reserve currency (the dollar), as encapsulated by the dilemma. Proposed solutions include imposing tariffs, negotiating agreements to weaken the dollar, and mandating purchases of U.S. Treasuries. However, apart from tariffs, these alternatives lack practicality. This has elevated the need for a more fundamental solution: an "Alternative Reserve Asset."
The significance of traditional reserve assets, such as gold, is anticipated to remain a focal point in the future. Concurrently, cryptocurrencies like Bitcoin are attracting increasing scrutiny within this context, with their roles as "digital gold" or strategic reserve assets gaining prominence. BlackRock, a leading asset management firm, highlights global financial instability, geopolitical risks, apprehensions regarding U.S. fiscal sustainability, and political uncertainty as key factors propelling Bitcoin's increasing value and broadening adoption.
Significance of Stablecoins
Synthesizing the discussion, the Trump administration's pro-cryptocurrency stance could be regarded as a potential remedy for the structural challenges the U.S. economy and the Dollar faces, notably the "Triffin Dilemma." Bitcoin holds the potential to evolve into an asset capable of addressing the Triffin Dilemma, and the growing positive perception of cryptocurrencies is translating into interest in stablecoins as well.
Stablecoins are receiving attention for multiple reasons, including its potential as future currency, a significant source of demand for U.S. Treasuries, a novel business opportunity for traditional financial institutions, and a complementary mechanism for expanding reserve assets. As such, major economies such as the United States, Europe, and Japan are prioritizing the institutionalization and legislative advancement of stablecoin.
The future of the global economy could be summarized by the following keywords: Digital, AI-driven, IoT, Humanoids, 24/7, Borderless, and Stateless. Amid transformative shifts, a new form of currency is essential to underpin the economy of tomorrow, and stablecoins may well provide that solution.
"You cannot develop economy of future without money of future."
In this context, if the advantages of a Korean won-based stablecoin are effectively harnessed while preserving Korea's manufacturing competitiveness, the Korean won could maintain its competitive position against other national currencies. The present moment is a prime opportunity for institutional and policy deliberation, in-depth research, and resolute innovation.
Following the listing of dollar-based stablecoins (USDT and USDC) on South Korea's leading digital asset exchanges, Upbit and Bithumb, domestic stablecoin trading volumes have surged dramatically. Notably, after USDT was introduced on Upbit in June 2024, transaction volumes expanded significantly, with monthly average trading volume reaching an estimated 11.3 trillion KRW over a six-month period from late 2024 to early 2025. Such rapid growth underscores the swift integration of stablecoins into the domestic crypto market and suggests a dynamic interplay with the traditional foreign exchange ecosystem may be occurring as well.
In the absence of legislation governing the issuance and circulation of stablecoins, substantial dollar purchases—unreflected in official foreign exchange statistics—are being facilitated through stablecoin transactions. Such phenomenon raises potential implications for the stability of South Korea's financial system and foreign exchange policies, necessitating a clear legal and institutional response.
Against this backdrop, Hashed Open Research has recognized the urgency of stablecoin legislation, and initiated a comprehensive report to provide in-depth analysis and propose policy alternatives. This report meticulously examines the current state of Korea's stablecoin market and aims to provide actionable policy directions through collaboration with relevant experts and stakeholders.
Hashed Open Research actively engaged with Korean stablecoin experts for discussion while writing the report, and cultivated a collective recognition of the need for stablecoin legislation. Through a series of multilateral meetings, the report was continuously refined and enriched, with emphasis on forming actionable regulatory suggestions.
Upon completion of the initial draft, Hashed Open Research convened an open seminar to incorporate feedback from external experts. Held on March 7, 2025, at Hashed Lounge, this seminar attracted over 100 attendees, reflecting significant interest in the sustainable growth of the stablecoin market and the development of a competitive regulatory system. This seminar served as a platform for gathering diverse perspectives, drawing participation from various external stakeholders such as representatives from domestic securities firms, banks, fintech companies, digital asset exchanges, financial authorities, as well as academic and industry specialists.
The event also enjoyed substantive dialogue on the direction of stablecoin legislation and the establishment of a coherent regulatory framework. Participants exchanged perspectives on how stablecoins should evolve within the context of South Korea's financial markets and their linkage to the global economy. Consensus emerged around the importance of striking a balance between ensuring financial stability and introducing innovative regulations.
Building on these discussions, this report incorporates policy recommendations aimed at promoting sound growth of the domestic stablecoin market and enhancing its global competitiveness. As legislative deliberations gain momentum in the future, Hashed Open Research anticipates that this report would serve as a practical guideline for shaping effective regulatory frameworks and legislations.
Read a Full Report “The Necessity of KRW Stablecoins and Proposal for a Legislative Framework”, co-authored by Hashed Open Research and Four Pillars
