SEOUL - South Korea’s Stablecoin Policy Talks Hindered by FX Stability Concerns
The stablecoin policy talks in South Korea have hit
a dead end following new caution from the Bank of Korea over risks such as
exchange rate volatility, capital flight and weak issuer oversight. The central
bank’s concerns are slowing momentum in the National Assembly, where lawmakers
are divided over whether and how to allow won-backed and foreign currency-linked
stablecoins.
In recent briefings, central bank officials
cautioned that poorly regulated stablecoin issuance could undermine South
Korea’s FX stability, especially if tokens are tied to the U. S. dollar. With
the country’s economy highly exposed to global capital flows, policymakers fear
that large-scale stablecoin adoption could accelerate cross-border fund
movements during periods of market stress.
Central Bank Flags Capital Flow and FX Volatility
Risks
The Bank of Korea has stressed on the point that
stablecoins, especially those which are tied to other currencies may cripple
its ability of controlling money supply. They cautioned that use of
dollar-pegged stablecoins by many people may heighten dollarization risks hence
putting the domestic financial system at a greater risk of suffering from
external shocks.
Regulators are also concerned that stablecoins could
act as fast-moving channels for capital flight, bypassing traditional banking
controls. In a high-volatility scenario, this could amplify currency swings and
pressure foreign exchange reserves.
Lawmakers Split on Stablecoin Issuance Framework
Members of parliament in South Korea are discussing
plans under which they can issue stable coins provided they follow certain
rules and regulations. Those who support say that there should be a legal
framework which will promote innovation within the country and prevent Korean
users from going to offshore platforms.
On the other hand, opponents argue that approving it
hastily without strong measures could put at risk both consumers as well as
financial sector. There are still differences on who should oversee the
issuers, how reserves should be kept and whether non-banking institutions
should be allowed to issue stable coins or not.
US Dollar-Linked Stablecoins a Key Sticking Point
The focus is on stablecoins pegged against the US
dollar. Although these dominate the global crypto market, South Korean
regulators fear that they might weaken the won’s role in national payments and
savings. The central bank has always insisted that any regime for stablecoins
must prioritize monetary independence and control over foreign exchange rates.
These worries have led to slow progress of
legislation with legislators seeking more views from financial regulators
before moving forward with a law.
0 Comments