The Bank of Korea (BOK) has released a report recommending that traditional banks lead the process of issuing stablecoins, rather than delegating this role to private companies. This approach, according to the regulator, is expected to ensure greater trust in digital currencies denominated in the national currency.
This is reported by Finway
Main Risks of Private Stablecoins
In its document, BOK emphasized the risks associated with so-called de-pegging — the disruption of the stability of stablecoins relative to their underlying asset. The regulator recalled the collapse of the Terra/LUNA ecosystem, which demonstrated the vulnerability of algorithmic currencies: “the algorithm that promised to maintain ‘1 coin = $1’ collapsed within days,” resulting in significant losses for investors. Additionally, the decline in the value of USDC during the bankruptcy of Silicon Valley Bank in 2023 was mentioned, when the coin’s price dropped to $0.88, leading many companies to enter crisis management mode.
BOK pays special attention to the dangers for stablecoins that are not backed by the dollar, even if they are denominated in currencies with high reserve status, such as the euro. The central bank emphasized that “currency functions not due to technology, but due to trust,” pointing to the insufficient capability of blockchain technologies to independently guarantee financial stability.
Banks and Strict Regulation as the Foundation of Trust
The regulator stressed that a successful development of digital currencies requires a harmony of innovation and regulatory reliability. Among the key aspects highlighted in the analysis are:
- Potential of Stablecoins: they can strengthen the financial infrastructure, but trust in such instruments is a critical condition;
- Regulatory Assurance: clear regulatory frameworks, control mechanisms, security guarantees, and reserves are necessary to ensure compliance with the promise of a 1:1 ratio to the national currency;
- Integration with Banking Systems: digital assets should function alongside traditional finance, not outside of it.
The BOK report emphasizes that:
“If the issuer cannot properly maintain reserve assets or their value decreases due to risky investments, the promise will not be fulfilled.”
In light of this, the Bank of Korea proposes a two-phase strategy for the implementation of stablecoins: in the first phase, they should only be issued by banks, and later, the gradual involvement of private companies should be allowed. The regulator also outlined conditions for launching a national digital currency, particularly within the framework of the government project Project Hangang, where banks are testing deposit tokens on the central bank’s blockchain.
Following this course, in September 2025, BDACS, together with Woori Bank, launched the country’s first fully regulated stablecoin KRW1 on the Avalanche blockchain. The platform received government recognition for its reliability in the public sector.
Political forces in South Korea support the development of legislative initiatives to regulate stablecoins: in July this year, the ruling and opposition parties presented alternative bills aimed at increasing the transparency and security of such assets.
In conclusion, BOK emphasized that stablecoins should be an organic part of the national financial system, not an alternative to it. According to the regulator, private issuers are unable to guarantee the necessary level of stability without strict government oversight and banking support.
It is worth noting that innovative solutions in the field of digital currencies are already being implemented in South Korea: foreign tourists have the opportunity to withdraw cash from USDT using crypto ATMs.