- Governor warns too many stablecoins could weaken South Korea’s economy.
- Lee urges teamwork to handle stablecoin risks and money supply.
- New bill sets clear rules for safe Korean won stablecoins.
The Governor of the Bank of Korea, Lee Chang-yong, has given a clear warning about the risks of letting too many non-bank companies issue local stablecoins. Speaking at a press event on Thursday, he said this could lead to serious problems for South Korea’s financial system. He drew a parallel with the 19th century when money was printed by individual companies and it caused a mix-up in the economy.
South Korea Pushes Won-Based Stablecoin Adoption Plans Forward
At this point, South Korea is attempting to expand the adoption of won-pegged stablecoin. This concept is included in the aims of President Lee Jae Myung, who wants to promote new digital payment devices. This plan is of interest to many banks and other private companies. They have already trademarked the names of stablecoins and logos. This is an indication that the private sector is willing to move fast.
But Governor Lee feels that this move should be planned well. He mentioned that when a huge number of non-bank companies create stablecoins, it will be more difficult for the Bank of Korea to control the money supply of the country. As an example, the bank may find it harder to charge reasonable interest rates or maintain the economy at its equilibrium. If something goes wrong, then the central bank might have to intervene later on and regain full control.
Besides, Governor Lee pointed to the possibility of having too many stablecoins pegged to the won, which will impact the foreign exchange policy of South Korea. He also said that letting private companies run payment services could hurt how banks earn money. Due to such risks, he added that this is not a decision that is to be made by the central bank. He reiterated that the teamwork of the government, the central bank, and other ministries must make the final decision. He further stated that this process has to be initiated by having the right people in the government.
New Bill Aims to Clarify Rules for Won-Pegged Stablecoins
Earlier this year, the Bank of Korea said it would play a larger role in making stablecoin rules. The move was made after the bank discovered that stablecoins are not similar to regular cryptocurrencies such as Bitcoin. In contrast to Bitcoin, stablecoins are pegged to reliable currencies, whether the won or the dollar. This renders them more similar to ordinary money with quicker transactions and convenient use online.
In the meantime, the government is also making preparations to establish unambiguous rules. In March, ruling party lawmaker Min Byeong-deok proposed a new bill to set clear rules for stablecoins linked to the won. This demonstrates that lawmakers are giving this subject more consideration and wish to safeguard the financial system.
In the future, South Korea has a large task. It will have to balance between experimenting with new technology and ensuring that its money system is secure. The warning of Governor Lee serves as a reminder that new instruments, such as stablecoins, require clear regulations and effective collaboration. When this is handled properly in the country, stablecoins may assist individuals and companies in transferring money seamlessly and quickly. However, they may reintroduce ancient ills that South Korea has strived to eliminate without sufficient rules and planning.