South Korea’s strategy to prioritize banks in the issuance of stablecoins is facing growing skepticism from blockchain industry leaders, with Dr. Sangmin Seo, chair of the Kaia DLT Foundation, questioning the rationale behind the central bank’s approach. According to Seo, mandating that only banks can issue stablecoins under the oversight of the Bank of Korea (BOK) lacks a solid logical basis and could hinder innovation in the country’s rapidly evolving digital asset landscape.
The BOK has argued that banks, being heavily regulated entities subject to capital adequacy, anti-money laundering (AML), and foreign exchange controls, are better positioned to manage the potential risks associated with stablecoins. The central bank believes this bank-led model would provide a strong regulatory safety net while introducing won-pegged digital assets into the financial system.
However, Seo contends that this reasoning is flawed. He emphasizes that risk mitigation and innovation are not mutually exclusive and that both banking and non-banking institutions should be given equal opportunities to participate in the stablecoin ecosystem—provided they meet strict regulatory standards. “The focus should be on establishing transparent, consistent guidelines for all potential issuers,” Seo stated. “This would not only reduce monetary risks but also allow healthy competition and technological advancement.”
Rather than relying solely on banks, Seo advocates for a regulatory framework that sets clear, enforceable requirements for stablecoin issuers. He believes that such a structure would enable a broader range of financial and fintech entities to contribute to the development of a robust and diversified stablecoin market in South Korea.
The central bank’s plan includes forming a specialized consultative body to determine key elements of stablecoin policy, such as issuer eligibility, issuance limits, and other operational parameters. This body would include representatives from monetary, financial, and foreign exchange regulators, further reinforcing the top-down control model favored by the BOK.
Adding to the controversy is the BOK’s proposal to prohibit yield generation on stablecoins. Officials argue that allowing stablecoins to offer returns would create direct competition with traditional bank deposits, potentially destabilizing the banking sector. Instead, the central bank is promoting the idea of deposit tokens—digital representations of bank deposits—which would be limited to officially recognized financial institutions.
Seo objects to a blanket ban on yield generation via stablecoins. While he agrees that stablecoins themselves should not carry built-in interest features, he argues that restricting their use in broader yield-generating financial products is a step too far. “Completely eliminating the potential for yield through stablecoin use could stifle adoption and reduce their utility in the financial ecosystem,” he warned.
Despite the ongoing debate, several South Korean banks have already announced plans to issue won-backed stablecoins, with rollouts expected in late 2025 or early 2026. At least eight major banks are preparing for the launch, signaling strong institutional interest in digital assets despite the regulatory uncertainty.
In parallel, major players in the country’s fintech sector are also moving aggressively into the stablecoin space. Naver Financial, the financial services arm of the tech giant Naver, is reportedly finalizing an acquisition of Dunamu—the operator of South Korea’s largest crypto exchange, Upbit. Following the acquisition, Naver Financial plans to introduce its own won-pegged stablecoin, potentially challenging the dominance of bank-issued tokens.
This growing competition reflects the broader momentum in South Korea’s crypto industry, which has seen a more favorable regulatory climate since the election of President Lee Jae-myung. The new administration has introduced several crypto-forward initiatives, including legislation to legalize stablecoins and clarify digital asset regulations.
The need for a more balanced, inclusive regulatory framework is becoming increasingly urgent as the digital asset industry expands. Many experts argue that innovation thrives in open, competitive environments—not in heavily restricted, monopoly-like systems. By limiting stablecoin issuance to banks, South Korea risks stifling innovation and losing its competitive edge in blockchain and Web3 development.
In addition, the global trend toward decentralized finance (DeFi) and programmable money underlines the importance of involving a wide range of participants in stablecoin ecosystems. Countries like the United States, Japan, and members of the European Union are all exploring regulatory models that include fintech firms, blockchain startups, and traditional financial institutions alike. South Korea’s bank-first model could isolate it from this international movement toward a more inclusive and innovative financial future.
Moreover, excluding non-banking entities from the stablecoin market could hinder financial inclusion. Startups and fintechs often develop products aimed at underserved or unbanked populations, and restricting them from issuing stablecoins could limit access to digital financial services for many Koreans.
The debate also raises broader questions about the role of central banks in shaping the future of money. Should central banks serve primarily as regulators, or should they also act as gatekeepers that determine who can participate in the next generation of digital finance? This remains a pivotal issue not only in South Korea but across the globe.
Ultimately, the path forward for South Korea may lie in a hybrid regulatory approach—one that combines strong oversight with open participation. By setting clear, risk-based criteria for stablecoin issuance and allowing both banks and qualified non-banks to operate under these rules, the country can reap the benefits of digital innovation while safeguarding financial stability.
As the stablecoin market continues to mature, the need for balanced, forward-looking policy becomes more critical. South Korea stands at a crossroads: it can either embrace a diverse, innovative future or double down on traditional models that may no longer be fit for the digital age. The decisions made today will shape the country’s position in tomorrow’s global financial system.