South Korea Stablecoin Framework Stalls as Regulators Split Over Bank Role A much anticipated regulatory framework for stablecoins in South Korea has hit a significant roadblock. The primary point of contention is a fundamental disagreement between financial regulators and the nation’s central bank regarding the role of commercial banks in issuing these digital assets. This dispute has effectively stalled progress on legislation that was widely expected to be finalized within the year. The core of the conflict centers on whether banks should be the exclusive entities permitted to issue stablecoins pegged to the South Korean won. The Financial Services Commission, the country’s top financial regulator, is reportedly advocating for this approach. Their position is that granting banks this dominant role would provide the strongest possible consumer protection and ensure systemic stability. Banks are already heavily regulated entities with established risk management and compliance frameworks, which regulators argue makes them the safest custodians for the reserves backing a stablecoin. However, the Bank of Korea is pushing back against this vision. The central bank is concerned that giving commercial banks a monopoly over won-pegged stablecoin issuance could inadvertently create new systemic risks. Their apprehension lies in the potential for a rapid and massive migration of deposits from traditional bank accounts into these new bank-issued stablecoins, especially during periods of financial stress or market uncertainty. This could severely disrupt the banks’ traditional lending operations and overall liquidity, potentially destabilizing the broader financial system. This disagreement has created a legislative impasse. Lawmakers are caught between these two powerful institutions and are hesitant to move forward with a bill until a consensus is reached. The delay is a setback for South Korea’s ambitions to become a more structured and secure hub for digital asset innovation. The absence of clear rules creates uncertainty for both domestic crypto businesses and international firms looking to operate in the South Korean market. The debate in South Korea reflects a larger global conversation about how to best regulate stablecoins. Different jurisdictions are exploring various models, from treating them like traditional electronic money to creating entirely new regulatory categories. South Korea’s internal struggle highlights the difficulty in balancing the promotion of financial innovation with the paramount need for financial stability and consumer protection. Industry observers are watching the situation closely. A resolution that favors the Financial Services Commission would likely mean a more controlled and bank-centric stablecoin ecosystem. A compromise that incorporates the Bank of Korea’s concerns might open the door for a more diverse set of issuers, but with extremely stringent reserve and operational requirements. For now, the timeline for South Korea’s stablecoin framework remains uncertain. The legislative process cannot advance until the country’s top financial authorities find common ground on the critical issue of who gets to issue a digital won.
