- Bank of Korea urges bank-only issuance of won-backed stablecoins
- BOK states that the institutions should have enough cash reserves to handle redemptions.
- Officials will require stablecoin issuers to be majority-owned by bank-led consortia.
Bank of Korea (BOK), South Korea’s central bank, is pushing for only licensed commercial banks to issue won-backed stablecoins. In a recommendation sent to lawmakers on February 23, the bank warned that allowing others to do so could increase money laundering risks, interfere with monetary policy, and threaten financial stability.
The call comes as the country finalizes its crypto rulebook, the Digital Asset Basic Act.
Bank of Korea says won stablecoins should only be issued by institutions with strong oversight and solid compliance systems. Additionally, they should have enough cash reserves to handle redemptions.
Officials warned that letting fintechs or crypto firms issue them could weaken the central bank’s control over the currency and create new risks in the payment system.
Anti-money laundering (AML) was mentioned as a major point of contention as well. It was pointed out that stablecoins make it easy to move money fast across borders, something that could be exploited without bank-level checks.
Limiting issuance to licensed banks would help ensure that capital rules and liquidity standards are met. This would also make sure that AML safeguards are actually enforced.
South Korea’s upcoming Digital Asset Basic Act is set to lay out licensing rules, require full reserves, and impose strict oversight on stablecoin issuers, which would make it one of the country’s most complete crypto regulations yet.
The call for tighter rules follows a string of high-profile crypto mishaps in South Korea, including a recent ghost Bitcoin transfer error at Bithumb, which has added pressure on authorities to tighten oversight.
A Consortium Model
South Korea’s Financial Services Commission is worried that going too strict could kill fintech innovation and hurt local companies’ ability to compete. Bank of Korea, on the other hand, is focused on financial stability and protecting the system.
As such, South Korean officials are looking at a middle ground, requiring stablecoin issuers to be majority-owned by bank-led consortia. This way, the banks would stay in charge of how stablecoins are issued and how reserves are managed.
The current proposition is that the banks would own at least 51% of any stablecoin issuer. Proposed rules would also force 100% reserve backing with safe assets like bank deposits or government bonds, so users can always redeem at full value.
Related: South Korea Recovers $21 Million in Stolen BTC After Hackers Return It
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