South Korea is making waves in the global financial landscape by prioritizing stablecoins as a key pillar of its economic strategy. Under President Lee Jae Myung, the country plans to lift the ban on issuing Korean won (KRW)-pegged stablecoins and foster a local ecosystem for these digital assets. While the move aims to bolster monetary independence and expand the digital economy, it has sparked debates about potential risks, including speculative misuse and regulatory overreach.
A Strategic Push for Digital Currency Sovereignty
South Korea’s decision to embrace KRW-pegged stablecoins stems from its goal to reduce reliance on foreign currencies like the U.S. dollar. According to lawmaker Min Byeong-deok, who led the campaign’s digital asset policy, the initiative seeks to curb capital outflows by promoting won-based stablecoins for cross-border transactions.
“The use of dollar stablecoins is directly linked to the outflows of capital, while settlement of overseas transactions using won-based stablecoins can reduce domestic capital being converted into foreign currencies,” Min told The Block.
By fostering a robust stablecoin market, South Korea hopes to diversify foreign exchange risks, lower trade costs, and attract global investment. The plan empowers private entities to issue KRW-pegged stablecoins, enabling industries such as content creators, game developers, and e-commerce platforms to integrate these tokens into their operations.
The private sector is already gearing up for this shift. Leading mobile payment platform KakaoPay recently filed related patent applications, signaling readiness to adopt KRW-backed stablecoins.
Proponents argue that stablecoins could serve as a cost-effective alternative to traditional payment methods. For instance, Korean tourists traveling abroad—or foreign visitors coming to Korea—could exchange KRW for USD (or vice versa) using stablecoins, eliminating hefty commission fees.
Skepticism Surrounding the Initiative
Despite the optimism, some industry experts question the practicality of KRW-pegged stablecoins.
“KRW stablecoins won’t solve the capital flight issue—they might even accelerate it,” said Brian Hoonjong Paik, co-founder and CEO of bitcoin investment services firm SmashFi. “Unlike the dollar, the Korean won is not a globally accepted currency. Issuing a won-backed stablecoin doesn’t suddenly give it international demand.”
Data from the Atlantic Council underscores the dominance of the U.S. dollar in global finance: it accounts for 57% of foreign exchange reserves and is used in 88% of all foreign exchange transactions as of January 2025. In contrast, the Korean won falls under the category of “nontraditional currencies,” which collectively hold only 10% of reserves.
Paik also raised concerns about the potential misuse of KRW stablecoins in speculative crypto markets, arguing they could expose South Korea’s monetary system to volatility. Additionally, he warned that government oversight could turn these private-sector-led stablecoins into a proxy central bank digital currency (CBDC), paving the way for financial censorship.
“Stablecoins match the demand for government bonds in that currency … No one is buying Korean won bonds,” X user and bitcoin author “bonghyeon_bro” wrote. “Forcing use in public institutions or businesses may bring some initial results. I just hope that the people involved won’t end up wasting resources and time.”
Instead of focusing on stablecoins, Paik suggested South Korea follow the example of El Salvador, which built a national bitcoin reserve.
“Bitcoin is the only truly neutral, censorship-resistant, and globally liquid digital asset,” Paik explained. “A bitcoin reserve offers Korea a chance to strengthen its monetary sovereignty by owning an asset that can’t be debased or controlled by foreign governments.”
Real-World Demand for Won-Pegged Stablecoins
Lawmaker Min countered skepticism by pointing to “real demand” for KRW-pegged stablecoins in the realm of digital finance.
“In the field of ‘digital finance,’ a won-based payment measure has realistic demand, seeing as Korean contents, gaming, e-commerce, and other services are expanding globally,” Min said.
He emphasized the potential for stablecoins to build a digital economic infrastructure for foreign users of Korean services or settlements with international merchants. This aligns with South Korea’s record-breaking $683.8 billion in exports last year, driven by growth in sectors like IT, shipbuilding, automobiles, and cosmetics.
Min also highlighted the importance of participating in the evolving global payment infrastructure ecosystem. Institutions like the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) have encouraged countries to experiment with digitizing their currencies for cross-border payments.
Striking a Balance Between Innovation and Regulation
To address concerns about financial censorship and overreach, Min clarified that KRW stablecoins would remain strictly private-sector-led and driven by market demand. However, he acknowledged the need for transparency measures, including reserve disclosures and issuer registration systems, to meet international anti-money laundering (AML) standards.
“This is not for capital control but a minimum requirement to secure trust in the international financial market,” Min said.
While supporting the integration of cryptocurrencies like bitcoin into investment products, Min noted that adopting El Salvador’s bitcoin reserve model would be challenging due to differences in currency policies, inflation structures, and political environments.
Broader Implications for Crypto Legislation
Min’s proposed Digital Asset Basic Act reflects South Korea’s renewed commitment to fostering innovation in the Web3 space. This follows years of regulatory caution after the collapse of TerraUSD, a South Korea-born stablecoin project that damaged the country’s reputation in the crypto world.
The legislation includes several key initiatives beyond stablecoins, such as lifting the ban on crypto exchange-traded funds (ETFs) and establishing a Digital Asset Committee overseen by the president.
However, critics like Paik argue that the administration’s focus on financialization and capital control overlooks core principles of blockchain technology, such as decentralization, self-custody, and monetary freedom.
“Lee’s agenda seems overly focused on financialization and capital control, not empowerment,” Paik wrote. “There’s no mention of protecting non-custodial wallets, supporting open-source development, or aligning with the Bitcoin ethos that underpins the entire space. That’s a major blind spot.”
In response, Min acknowledged the importance of preserving blockchain’s core values while ensuring consumer protection and market integrity.
“To strike a balance, we will ensure that market autonomy and the right to self-custody are guaranteed at a ‘technology/protocol’ level, with regulations intervening only to ensure the transparent operation of platforms,” Min said.
Final Thoughts
South Korea’s embrace of KRW-pegged stablecoins represents a bold step toward reshaping its digital economy. While the initiative holds promise for reducing reliance on foreign currencies and fostering innovation, it also faces significant challenges, including limited global demand for the Korean won and concerns about regulatory overreach.
As the country navigates this uncharted territory, finding the right balance between fostering innovation and safeguarding market participants will be crucial. Whether South Korea succeeds in becoming a leader in the global stablecoin landscape remains to be seen—but its efforts underscore the growing importance of digital assets in shaping the future of finance.
