South Korea’s Push for Won-Backed Stablecoins Signals Bold Crypto Ambitions
Seoul, September 9, 2025 – South Korea is poised to reshape its digital finance landscape with a groundbreaking initiative to introduce Korean won (KRW)-pegged stablecoins [1], championed by newly elected President Lee Jae-myung. The move, aimed at curbing capital outflows and bolstering financial sovereignty, marks a significant step toward integrating digital assets into the nation’s mainstream economy. However, the proposal has sparked both enthusiasm and skepticism among industry experts, highlighting the complex balance between innovation and economic stability.
A Response to Capital Outflows
President Lee’s administration has prioritized the creation of a won-backed stablecoin market [2] to address the substantial capital outflows tied to foreign stablecoins like USDT and USDC. In the first quarter of 2025, South Korean crypto exchanges [3] recorded outflows of 56.8 trillion won (approximately $42 billion), with nearly half attributed to dollar-based stablecoins. “The use of dollar stablecoins is directly linked to the outflows of capital,” said Min Byeong-deok, a key lawmaker and Lee’s former head of digital assets, in an interview. “Settlement of overseas transactions using won-based stablecoins can reduce domestic capital being converted into foreign currencies.”
The initiative, embedded in the proposed Digital Asset Basic Act [4], seeks to lift South Korea’s current ban on domestic stablecoin issuance. The legislation outlines strict requirements, including a minimum capital reserve of 500 million won ($368,000) for issuers and oversight by the Financial Services Commission (FSC). By fostering a regulated environment, the government aims to retain national wealth, reduce reliance on foreign currencies, and enhance South Korea’s position in the global digital economy.
Economic Benefits and Industry Support
Proponents of the plan argue that won-backed stablecoins could revolutionize South Korea’s financial ecosystem. Min Byeong-deok emphasized potential benefits, including reduced trade costs, diversified foreign exchange risks, and increased global investment in the local economy. He envisions private entities, such as content creators, game developers, and e-commerce platforms, actively adopting these stablecoins to facilitate seamless transactions. “In the field of ‘digital finance,’ a won-based payment measure has realistic demand, seeing as Korean contents, gaming, e-commerce, and other Korean services are expanding globally,” Min noted.
South Korea’s private sector is already mobilizing. KakaoPay [5], a leading mobile payment platform, has filed patent applications for stablecoin-related technologies, signaling early industry enthusiasm. Sam Seo, chairman of the Kaia DLT Foundation, highlighted the practical applications: “A Korean won-backed stablecoin can fill a niche as an alternative to traditional payment methods like bank wiring or currency exchange,” potentially lowering commission costs for cross-border transactions.
Criticism and Challenges
Despite the optimism, the initiative has drawn criticism from industry experts who question its feasibility and economic implications. Brian Hoonjong Paik, CEO of SmashFi [6], argued that the Korean won’s limited global demand—compared to the U.S. dollar, which dominates 57% of global foreign exchange reserves—could undermine the initiative. “KRW stablecoins won’t solve the capital flight issue—they might even accelerate it,” Paik warned, noting that the won lacks the international acceptance needed to compete with dollar-based stablecoins.
Additional concerns center on the potential for won-backed stablecoins to act as a proxy for a central bank digital currency (CBDC), raising fears of financial censorship. Paik suggested that South Korea consider a national Bitcoin reserve instead, citing Bitcoin’s neutrality and resistance to debasement. Bank of Korea Governor Rhee Chang-yong [7] has also expressed caution, warning that private stablecoin issuance could disrupt monetary policy and increase the money supply, potentially destabilizing the financial system.
The collapse of TerraUSD, a South Korean-linked stablecoin project in 2022, looms large, fueling regulatory caution. To address these risks, the Digital Asset Basic Act emphasizes transparency, reserve disclosure, and issuer registration to align with international anti-money laundering standards. Min stressed that the stablecoins would remain private-sector-driven, guided by market demand rather than government control.
A Broader Crypto Vision
The stablecoin initiative is part of President Lee’s broader pro-crypto agenda, which includes legalizing spot cryptocurrency exchange-traded funds (ETFs) and establishing a Digital Asset Committee under direct presidential oversight. These reforms aim to position South Korea as a global “digital asset center,” capitalizing on its vibrant crypto market, which boasts 18 million investors and over $74 billion in holdings.
However, critics like Paik argue that the focus on financialization overlooks blockchain’s core principles of decentralization and self-custody. In response, Min acknowledged the importance of preserving these values, promising to balance innovation with investor protection through minimal regulatory intervention.
Global Context and Future Outlook
South Korea’s stablecoin push aligns with global trends, as countries like the U.S. advance their own stablecoin regulations. The Bank for International Settlements (BIS) and International Monetary Fund (IMF) have encouraged experiments in currency digitization for cross-border payments, positioning South Korea’s initiative as a preemptive step toward global interoperability.
As the Digital Asset Basic Act moves through the National Assembly, the world is watching whether South Korea can overcome its challenges—regulatory hurdles, central bank resistance, and past crypto scandals—to establish a thriving, regulated stablecoin market. With President Lee’s administration driving this bold experiment, South Korea could redefine digital finance in Asia and beyond.