Key Takeaways
- Local currency stablecoins are on the rise across Asia.
- In Japan and South Korea, financial authorities tend to favor bank-issued stablecoins.
- But fintech startups are also poised to enter the space.
As Asian nations embrace stablecoins, competing visions for the technology pit Big Finance traditionalists against fintech upstarts.
In Japan and South Korea, a key question sits at the heart of the debate.
Should stablecoins be the preserve of banks, extending their control over the creation of commercial money into the digital era?
Or should regulators open the market up to a wider range of participants?
Japan’s Nascent Stablecoin Market
The Japanese government paved the way for local currency stablecoins when it revised the Payment Services Act in 2023.
However, the Financial Services Authority didn’t license the first JPY-pegged coin until this year.
The launch of JPYC represents a victory for team fintech.
The company behind the token spent years preparing the ground, and was finally rewarded with a funds transfer service provider (FTSP) registration in August.
FTSPs are one of three types of entities authorized to issue stablecoins in Japan. The other two are deposit banks and trust banks.
While fintech stablecoins won an early lead, Japan’s banks aren’t far behind, with five of the country’s largest institutions working together on a joint stablecoin project.
Initially launched in October, the project will receive support from the FSA’s fintech hub, the banking consortium announced on Nov. 7.
With the regulators’ endorsement, bank-issued stablecoins have received a major boost in Japan.
But for now, banks aren’t looking to compete with retail-focused products like JPYC.
Instead, the ongoing pilot is mostly exploring stablecoins as an interbank settlement technology.
South Korea Favors Bank-Issued Coins
The divide between fintech- and bank-issued stablecoins is also evident in South Korea.
Bank of Korea (BoK) Governor Rhee Chang-yong has explicitly stated that he wants commercial banks to take the lead.
“If we allow non-banks to issue stablecoins, this will cause major chaos,” he cautioned in July.
Despite pressure from lawmakers and a crop of potential issuers waiting in the wings, the central bank maintains a conservative stance.
In a recent report, the BoK outlined continued reservations about stablecoin risks.
It has also displayed a renewed commitment to central bank digital currencies (CBDCs) and tokenized deposits, restarting tests with commercial banks that had previously stalled.
Asian Stablecoin Race Heats up
As in Japan, South Korean authorities have shown a preference for bank-issued stablecoins, but the letter of the law doesn’t rule out fintech incumbents securing a role.
Technology startups move faster, can start small before scaling up, and are less concerned about integrating with complex fiat infrastructure.
Other Asian nations have their own approach.
The Hong Kong Monetary Authority is gearing up to issue its first stablecoin licenses within months. Some of the strongest contenders to take the lead there are Chinese Big Tech firms.
One potential outcome is a fragmented market in which bank-owned stablecoins power the bulk of digital settlement, while technology companies provide USD alternatives for domestic crypto trading.
Regardless of how it occurs, a wave of stablecoins denominated in currencies like JPY, HKD, and KRW is coming.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
