tl;dr
The Bank of Korea (BOK) faces backlash from industry expert Dr. Sangmin Seo over its proposal for banks to lead stablecoin issuance, amid debates over regulatory fairness, yield restrictions, and South Korea's rapidly evolving crypto landscape.
**Bank of Korea’s Stablecoin Plan Faces Criticism from Industry Expert**
*Dr. Sangmin Seo argues that a rules-based approach for all issuers would better balance innovation and risk*
**BOK’s Proposal and Seo’s Critique**
The Bank of Korea (BOK) has proposed that domestic banks lead the rollout of won-denominated stablecoins, citing their existing regulatory frameworks as a safeguard against risks. In a recent report, the central bank emphasized that banks are already subject to stringent capital, foreign exchange, and anti-money laundering (AML) regulations, which could mitigate potential vulnerabilities associated with stablecoins. The BOK also suggested establishing a joint policy consultative body involving currency, foreign exchange, and financial authorities to oversee issuer eligibility and key operational parameters.
However, Dr. Sangmin Seo, chair of the Kaia DLT Foundation, has challenged this approach, calling it “illogical.” Seo argued that while the BOK’s concerns about stablecoin risks are valid, its focus on banks as primary issuers lacks a clear foundation. Instead, he advocates for a unified regulatory framework that applies equally to all stablecoin issuers—banking and non-banking institutions alike. “Clear rules for all would minimize monetary risks while fostering innovation,” Seo stated, emphasizing that such an approach would enable entities to compete based on their merits.
**The Stablecoin Yield Ban: A Point of Contention**
The BOK has also floated a proposal to ban interest payments on stablecoins, fearing they could compete with bank deposits and destabilize the financial sector. The central bank instead favors the development of “deposit tokens,” which would represent traditional bank deposits in digital form.
Seo, however, criticized this as an “excessive measure” that could stifle adoption. While he acknowledged that stablecoins themselves should not offer yield-bearing features, he argued that restricting supplementary yield generation through stablecoins would limit their utility. “Allowing supplementary yield creation should be permitted,” he said, stressing that such a move would preserve the tokens’ practical value and encourage broader use.
**South Korea’s Stablecoin Market Heats Up**
Despite regulatory debates, South Korea’s stablecoin landscape is rapidly evolving. At least eight major banks announced plans in June to launch won-backed stablecoins by late 2025 or early 2026. Meanwhile, Naver Financial, the fintech arm of tech giant Naver, is advancing a bid to acquire Dunamu, operator of the country’s largest crypto exchange, Upbit. The deal, once finalized, would position Naver to enter the stablecoin market with a won-denominated project.
The regulatory environment has also shifted in favor of crypto innovation. Following the election of President Lee Jae-myung in June, South Korea has seen momentum toward crypto-friendly policies, including a bill to legalize stablecoins.
**Implications for the Future**
The clash between the BOK’s bank-centric approach and Seo’s call for equitable regulation reflects broader tensions in balancing innovation with financial stability. As South Korea’s crypto sector grows, the path forward will likely hinge on striking a delicate balance between oversight and flexibility. Seo’s emphasis on clear, inclusive rules underscores the need for a regulatory framework that adapts to the dynamic nature of digital assets while safeguarding economic integrity.
With major players poised to enter the market and policymakers under pressure to act, the debate over stablecoins in South Korea is far from over. The outcome could shape the future of digital finance in the region—and beyond.