The Bank of Korea (BOK) has called on the country’s financial institutions to take the lead in implementing stablecoins, emphasizing the need for trust and regulatory support for digital currencies.
This is reported by Business • Media
Risks of Private Issuers and the Role of Banks
In a recently published report, the regulator noted that private companies issuing stablecoins are unable to provide a sufficient level of trust to support the stability of the national currency in digital form. Among the main threats to such assets, the central bank highlights de-pegging—the loss of the exchange rate’s tie to the underlying asset—as well as the risks of losing user trust.
BOK emphasizes that traditional banks should play a key role in the issuance of stablecoins. The document states that “currency functions not because of technology, but because of trust,” and that blockchain alone does not guarantee stability. To illustrate the dangers, it mentions the collapse of the Terra/LUNA ecosystem, where the algorithm intended to maintain exchange rate stability failed, leading to significant losses for investors. It also cites examples of vulnerability even among large stablecoins, such as during the bankruptcy of Silicon Valley Bank in 2023, when the USDC exchange rate dropped to $0.88, forcing many companies to operate in crisis mode.
“If the issuer cannot properly maintain reserve assets or their value declines due to risky investments, the promise will not be fulfilled.”
Principles for Implementing Digital Currency
BOK stresses that technological innovations must be accompanied by reliable regulation, as “the harmony of innovation and trust” is a key challenge for the digital currency market. Bank analysts note three main directions:
- Potential and Role of Stablecoins: the ability to expand financial infrastructure, but trust in such instruments remains a critical factor;
- Regulation and Governance: the importance of clear regulatory frameworks, ensuring security, reserve assets, and effective oversight to maintain the stated peg to the national currency;
- Integration with Payment Systems: digital assets must work alongside traditional financial structures.
In September 2025, South Korea launched its first regulated stablecoin KRW1 on the Avalanche blockchain with the participation of BDACS and Woori Bank. The platform received government recognition for its reliability in applications for the public sector.
BOK proposes a phased model for the implementation of stablecoins: in the first phase, they should be issued exclusively by banks, with a gradual expansion of private sector participation thereafter. This approach aligns with government initiatives, including Project Hangang—testing deposit tokens by banks on the central bank’s own blockchain.
The political forces in the country also support this direction: in July 2025, both the ruling and opposition parties prepared alternative bills regarding the regulation of stablecoins.
The Bank of Korea recognizes the strategic importance of stablecoins but believes that:
- private issuers are unable to guarantee stability;
- successful stablecoins must be based on trust in banks and strict regulation;
- digital currency should be part of the country’s financial system, not an alternative to it.
Furthermore, in South Korea, foreign tourists already have the ability to withdraw cash from USDT through special crypto ATM devices, indicating the development of digital financial services in the country.