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Dr. Sangmin Seo, chair of the Kaia DLT Foundation, has voiced strong criticism against the Bank of Korea's (BOK) proposed strategy for rolling out won-denominated stablecoins, deeming it "illogical." The central bank's plan prioritizes the banking sector as the primary issuer, citing existing regulatory frameworks as a safeguard against potential risks.
Key Takeaways
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Kaia chair Dr. Sangmin Seo argues South Korea's bank-first stablecoin strategy lacks logical foundation.
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Seo advocates for clear, universal rules for all stablecoin issuers to foster innovation and minimize risks.
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Concerns are raised about the BOK's proposed ban on stablecoin yields, potentially hindering adoption.
A Call for Clearer Rules
Seo acknowledged the BOK's concerns regarding stablecoin risks but stated that the argument for banks to lead the initiative "seems to lack a logical foundation." He proposed that a more effective approach would involve establishing clear rules applicable to all stablecoin issuers. This would not only help minimize monetary risks but also encourage innovation, allowing both banking and non-banking institutions that meet the criteria to compete and showcase their strengths.
He further suggested that the BOK could provide valuable guidance on risk mitigation strategies and the qualifications required for a trustworthy issuer. This would create a more equitable and transparent environment for the burgeoning stablecoin market.
Stablecoin Yields and Market Developments
The BOK's proposal also includes a potential ban on interest payments for stablecoins, arguing that such features could directly compete with bank deposits and disrupt the financial sector. Instead, the central bank has pitched the commercialization of deposit tokens. However, Seo believes a complete ban on stablecoin yields would be an excessive measure that could significantly limit their utility and adoption. He argued that while stablecoins themselves shouldn't inherently bear yield, restricting the generation of supplementary yield through their use would be detrimental.
The South Korean stablecoin market is showing signs of activity, with at least eight major banks announcing plans to launch won-pegged stablecoins by late 2025 or early 2026. Additionally, Naver Financial is reportedly pursuing the acquisition of Dunamu, the operator of Upbit, with the intention of launching its own Korean won-backed stablecoin project post-acquisition. The crypto industry in South Korea has seen a more favorable climate following the election of President Lee Jae-myung, who has advanced legislation, including a bill to legalize stablecoins.
Sources
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South Korea’s bank-first stablecoin approach lacks logic, says Kaia chair — TradingView News, TradingView.
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