South Korean Lawmakers Are Progressing Legislation for a Won-Based Cryptocurrency, Amid Rising worries over the US Dollar's Preeminence
South Korea is taking significant steps towards the development and regulation of stablecoins, a type of cryptocurrency pegged to the value of a fiat currency, in an effort to compete in the global market currently dominated by US dollar-pegged cryptocurrencies.
Following President Lee Jae-myung's inauguration, a stablecoin implementation task force was established, and the bills were developed in coordination with the finance ministry, Bank of Korea (BOK), and Financial Services Commission. This coordinated approach is a key part of President Lee's key campaign pledge on stablecoin legislation.
Two Democratic Party lawmakers, Ahn and Ahn Do-geol, are leading the charge. Ahn's proposals include revisions to foreign currency transaction laws and enhanced regulatory coordination between key financial authorities. He believes the Bank of Korea should be empowered to maintain financial stability in relation to stablecoins, and the finance ministry needs a legal foundation to exercise its authority over stablecoins.
Ahn's bills would mandate that issuers hold collateral equivalent to the full value of issued cryptocurrencies and strengthen oversight by the Bank of Korea and Ministry of Economy and Finance. This is to ensure the stability and security of the won-denominated stablecoins.
Meanwhile, another Democratic Party lawmaker, Min Byung-deok, introduced three bills that would establish a broader legal framework for digital assets. These bills cover not only stablecoins but also security token offerings and spot market exchange-traded funds backed by virtual assets. Min warns of the urgency facing Korean policymakers due to the potential dominance of dollar stablecoins.
The legislation allows non-financial companies to issue won-based stablecoins, which could expand the market beyond the Bank of Korea's authority. The proposed legislation is expected to pass through the National Assembly within the year, with both lawmakers expressing confidence in its approval.
The appointment of blockchain expert Kim Yong-beom as President Lee's chief policy aide reflects the administration's commitment to digital asset advancement. Kim previously led Hashed Open Research, the think tank of Korea's largest cryptocurrency investment firm.
The US Congress's recent passing of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS Act) brings cryptocurrencies into mainstream regulation and boosts demand for US Treasuries. This move has heightened the competition in the global stablecoin market, with South Korea positioning itself as a potential competitor.
In summary, South Korea is making significant strides in the development and regulation of stablecoins, aiming to compete in the global market and advance its digital asset ecosystem. The upcoming legislative proposals from South Korean legislator Shin Dae-nam are expected to provide further insights into the country's approach to won-denominated cryptocurrencies.
