Bank of Korea Forms Crypto Committee as Lawmakers Spar Over Stablecoin Rules

Key Takeaways

The Bank of Korea has formed a committee to discuss stablecoin regulation.
South Korea’s ruling and opposition parties have proposed competing stablecoin bills in the National Assembly
The bills diverge on areas including interest-bearing stablecoins.

With stablecoin regulation rising on the government’s agenda, the Bank of Korea has formed a new “Virtual Asset Committee” to discuss the matter.

Stablecoin policy has also emerged as a key policy battle in the National Assembly, with the ruling and opposition parties proposing competing bills.

Central Bank Virtual Asset Committee

The Bank of Korea’s decision to establish a virtual asset division under the Financial Settlement Bureau is part of its broader effort to establish digital currency rules fit for the modern era.

“We plan to respond to discussions related to stablecoins and virtual assets through the Virtual Asset Committee and work collaboratively with the government, National Assembly, and others during the legislative process,” a Bank of Korea official said.

The Financial Settlement Bureau also houses the Digital Currency Lab, which is exploring central bank digital currencies (CBDCs).

In public statements, bank officials have emphasized that they view CBDCs, stablecoins and tokenized deposits as part of the same larger trend for digital payment tokens.

“Whether it’s a won stablecoin or a [CBDC-based deposit token], we need a digital currency in the future,” Rhee Chang-yong said at an event in June.

DPK and PPP Offer Competing Visions for Stablecoin Regulation

On Monday, July 28, members of the ruling DPK proposed the Act on the Issuance and Distribution of Stable-Value Digital Assets.

Meanwhile, members of the opposition People Power Party proposed the Act on Payment Innovation Using Value-Pegged Digital Assets.

Both bills would require stablecoin issuers to be regulated and licensed by the Financial Services Commission (FSC).

However, they diverge in some key areas.

One major difference is that the DPK bill explicitly bans interest-bearing coins while the PPP bill doesn’t.

Other differences relate to consumer protections, minimum redemption times, and the treatment of non-KRW stablecoins.

“A Small Boat in a Tsunami,” Warns Korean Lawmaker

Commenting on disagreements in the National Assembly, DPK Representative Min Byeong-deok, who is behind South Korea’s Digital Basic Act, warned against turning stablecoin regulation into a political battleground.

“Stablecoins are surging like a tsunami,” he said, “but we are fighting over who will run a small boat in the face of a tsunami.”

Central Bank Favors Bank-Issued Stablecoins

Although they disagree on specifics, both parties have proposed a regulatory framework that allows technology companies to issue digital won.

In contrast, Bank of Korea governor Rhee Chang-yong has said only banks should be able to issue stablecoins.

Following the introduction of South Korea’s Digital Basic Act, eight of the country’s largest banks formed a joint venture to develop a KRW-pegged stablecoin.

“If we allow non-banks to issue stablecoins, this will cause big chaos,” Rhee Chang-yong warned earlier this month.

Against this backdrop, the central bank plans to form a dedicated stablecoin team, Yonhap News reported on Tuesday.

Promoting Won Stablecoins

South Korea’s recent push for stablecoin regulation reflects concerns about the growing influence of dollar-pegged stablecoins like USDT and USDST.

Whether issued by commercial banks or financial technology companies, won-pegged stablecoins are posited as a means of preventing capital outflow and securing a role for the won in highly digital sectors like crypto trading.

Finalizing some form of stablecoin regulation “is our last chance to take some portion of the market even if we can’t outsmart dollar stablecoins as a settlement tool,” said Min Byeong-deok.

“Speed is the key,” he emphasized.