Who Will Mint the Digital Won?
The Pickle Over Digital Won
South Korea is grappling with a contentious issue: who should be allowed to create a digital version of its currency, the won. The country's central bank advocates for banks to be in charge, while others fear this could stifle competition and innovation.
The Bank of Korea's Stance
The Bank of Korea argues that banks should control the issuance of won-backed stablecoins. They believe this will:
- Maintain financial stability
- Prevent sudden outflows of money
However, regulators and lawmakers are worried that this could:
- Limit competition
- Slow down the growth of the digital currency market
The Digital Asset Basic Act
The debate revolves around the proposed Digital Asset Basic Act, which aims to define stablecoin issuance and supervision. The Bank of Korea supports a "banks-first" model, where banks would have at least 51% ownership of any stablecoin consortium.
The Opposition's View
The Financial Services Commission and lawmakers argue that:
- A bank-led model could create a monopoly
- More companies should be allowed to issue won-backed stablecoins
- This would increase competition and innovation
The Standoff and Its Consequences
The standoff has delayed the passage of the Digital Asset Basic Act, with the bill now expected to be pushed into 2026. In the meantime, firms like Toss are preparing to issue a won-backed stablecoin once the rules are finalized.
The Core of the Debate
The dispute is ultimately about which institution should have primary responsibility when private money becomes systemically important.
- Bank of Korea's View: Stablecoins are a potential extension of the payments system and a monetary policy and financial stability issue.
- Financial Services Commission's View: Stablecoins are a regulated financial innovation that can be supervised through licensing, disclosure, reserve standards, and ongoing enforcement.
The Controversial "51% Rule"
The "51% rule" suggests that a won-backed stablecoin issuer should be a consortium led by commercial banks, with banks holding at least a 51% ownership stake.
- Bank of Korea's Argument: This will ensure responsible issuance and management.
- Critics' Argument: This could reduce competition and slow experimentation.
Regulatory Safeguards
Even if South Korea allows non-banks to issue won-backed stablecoins, regulators have measures to prevent shadow-bank-like risk characteristics. The government's draft approach focuses on:
- Reserve quality
- Segregation
- Highly liquid, low-risk backing such as bank deposits and government debt
Market Preparations
The regulatory standoff is unfolding while the market is already preparing for won-backed stablecoins.
- Major commercial banks are gearing up for a bank-led model.
- Large consumer platforms and crypto-native players are exploring how they could issue or distribute a won-pegged token if the rules allow it.
The longer Korea debates issuer eligibility, the more everyday stablecoin activity defaults to offshore, dollar-based infrastructure.
