Bank of Korea Exploring Using 'Stablecoins Issued by the Private Sector'

Bank of Korea Explores Linking Deposit Tokens to Public Blockchain

The Bank of Korea is considering a groundbreaking move that would position its state-backed digital currency alongside private-sector stablecoins operating on open networks. The bank's Deputy Governor, Lee Jong-ryeol, revealed that the tokens will be "a type of stablecoin issued within the digital currency system built and operated by the Bank of Korea."

According to Lee, the initiative is being pursued from "a national perspective" and falls under the Bank of Korea's responsibility as a monetary and foreign exchange authority. The goal is for the deposit tokens to "coexist within the entire digital currency system in conjunction with stablecoins issued by the private sector."

However, the proposal has raised questions about how such a hybrid system might function across jurisdictions. Peter Chung, the head of research at Singapore-based algorithmic crypto trading firm Presto Labs, expressed concerns, stating that "the way to protect monetary sovereignty is not by tinkering with token design or network architecture, but through sound monetary and fiscal policies."

The Deputy Governor also voiced concerns over the growing use of global stablecoins in South Korea, calling their influx "the most concerning part." The official warned that using them as currency substitutes could lead to violations of monetary sovereignty, weakened policy controls, financial instability, and increased money laundering risks.

Meanwhile, the South Korean political landscape is also grappling with the issue. Democratic Party of Korea presidential candidate Lee Jae-myung has proposed launching a won-backed stablecoin to reduce capital outflows and reliance on dollar-denominated tokens.

The Bank of Korea is also part of the Agora Project, a cross-border settlement system with central banks from seven countries, which is designed to ensure that "a country's deposit token cannot be used directly in another country."

Globally, the stablecoin market continues to grow, with the total market cap now standing at $249.6 billion, up 0.3% in the last 24 hours, according to CoinGecko data.