Is a South Korean Won Stablecoin on the Horizon? Authorities to Submit Regulatory Draft in October, Major Banks in Talks with Circle

South Korea’s Financial Services Commission (FSC) to Submit “Stablecoin Regulation Bill” to Parliament in October

The South Korean Financial Services Commission (FSC) is expected to submit a “Stablecoin Regulation Bill” to the National Assembly in October, paving the way for the Korean won stablecoin market. This policy, originating from President Lee Jae-myung’s campaign promise, is being actively promoted between the National Assembly and regulatory agencies, with local four major banks also ramping up preparations and even revealing meetings with USDC issuer Circle.

FSC Confirms Submission of Stablecoin Bill in October

According to South Korean media outlet MoneyToday, the FSC has confirmed that it will publicly submit a stablecoin regulation bill in October 2023. This bill will clearly define issuance conditions, collateral management, and internal risk control, and will be incorporated into the legislative framework of the second phase of the “Digital Asset User Protection Act,” symbolizing an accelerated institutionalization of the Korean won stablecoin.

Ruling party lawmaker Park Min-kyu revealed that he has received a report from the FSC confirming the relevant legislative plans. Once the government draft is made public, it will be reviewed alongside several existing versions of bills from lawmakers in the National Assembly, including the “Digital Asset Basic Act” and the “Value-Stable Digital Asset Act” proposed by Democratic Party lawmakers.

Strategic Significance of the Korean Won Stablecoin: Campaign Promises and International Pressure

The focus on the Korean won stablecoin is closely tied to the policy blueprint of newly elected President Lee Jae-myung. During his campaign, Lee promised to create an active local stablecoin market to strengthen South Korea’s monetary sovereignty in the digital finance era, as part of a global financial strategy.

Another layer of pressure comes from the United States, where the Trump administration attempted to pave the way for consolidating the dominance of the US dollar stablecoin by signing the “GENIUS” Act. The FSC believes that if it does not accelerate the advancement of the Korean won stablecoin, it will be marginalized in the future digital financial order.

At the same time, Japan is also moving quickly, anticipating the approval of the yen stablecoin (JPYC) as soon as this fall, which has become one of the reasons for South Korea to take its steps forward.

Four Major Banks Fully Prepared: Circle as a Potential Partner

Before the regulatory bill is released, South Korea’s four major banks, including KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Bank, have already taken preemptive action. Reports indicate they are considering a meeting with Circle’s President Heath Tarbert next week to discuss the circulation, payment, and cross-border remittance cooperation of USDC in the South Korean market.

The aforementioned banks have also launched internal projects, including the establishment of stablecoin business and policy departments, studying the introduction of stablecoin for domestic and cross-border payments, and various testing initiatives.

In June, eight major local banks also revealed plans to establish a joint venture to lead the issuance and technological framework, preparing to launch a Korean won-based stablecoin. Members include KB, Shinhan, Woori, Nonghyup, IBK, Suhyup, Citibank Korea, and Standard Chartered Korea.

Bank of Korea Warns: Issuance Should Be Limited to a Few Entities

However, the Bank of Korea has issued a warning regarding this matter. Chairman Lee Chang-yong publicly stated last month that the issuance of the Korean won stablecoin should be confined to a few licensed banks to avoid excessive dispersion that could impact foreign exchange and monetary policy.

Conclusion

Currently, South Korea’s stablecoin legislation stands at the intersection of institutionalization and risk management. The hurried advancement by the government, National Assembly, and enterprises contrasts with the cautious attitude of regulatory bodies and the central bank. As the bill is set to be unveiled in October, how South Korea balances innovation, sovereignty, and financial stability will not only affect the domestic market but also become a key case in the digital currency competition in East Asia.

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