Korean Banks Rush to Test Stablecoins Amid Government Regulatory Stalemate

Korean banks and financial firms are racing to test stablecoins as the government struggles to establish a regulatory framework. Despite the delay, companies such as Kakao Group and KB Financial Group have already begun technology trials and preparations for market entry.

The Financial Services Commission initially sought to submit legislation in the first quarter of this year but progress has remained slow due to disagreements over issues including who should be allowed to issue won-denominated stablecoins. The proposed structure requires banks or banking consortiums to hold at least 50 percent plus one share in entities issuing won-denominated stablecoins, and a proposed 20 percent cap on the stakes controlling shareholders can hold in digital asset exchanges.

Market players are already prepared to enter the field as other countries such as the United States, Japan, Britain, and the European Union have established rules for the issuance of stablecoins. The supply of euro-denominated stablecoins has grown significantly this year, up 22.6 percent from $691.7 million at the beginning of the year.

The ruling Democratic Party (DP) is considering a public hearing on the Digital Asset Basic Act to accelerate the legislation and address concerns that Korea may fall behind in international competition. The government views won-denominated stablecoins as necessary to safeguard monetary sovereignty, preventing dollar-denominated stablecoins from dominating trade and blockchain-based commerce.