The stablecoin (coins designed to track the value of legal tender such as the dollar, or a specific asset) market has surpassed the foreign exchange reserves of some advanced financial countries such as the United Kingdom and Canada. Digital currency is evolving into new financial infrastructure, but Korea's institutionalization of stablecoins has been stalled for years.
According to decentralized finance (DeFi) data platform DefiLlama on the 29th, the total market capitalization of stablecoins stood at $310.2 billion (about 465 trillion won) as of the previous day. "USDT," the dollar-based stablecoin issued by Tether, accounted for more than half of the market.
The size of the stablecoin market is larger than the foreign exchange reserves as of the end of April in 95 countries including the United Kingdom, Canada, the United Arab Emirates (UAE), Poland, Thailand and Mexico. Korea's foreign exchange reserves stood at $427.8 billion as of the end of April.
The Bank for International Settlements (BIS) said in a recent report that stablecoins are rapidly replacing the existing international remittance system. The BIS analyzed, "In regions where the existing correspondent banking network is slow or the expense is high, the use of stablecoin-based cross-border remittances is growing rapidly. Activity is particularly pronounced in countries with high inflation and severe exchange-rate instability."
In Korea, the legalization of a won-denominated stablecoin has been delayed due to differences of opinion between the Financial Services Commission and the Bank of Korea (BOK) during the institutionalization process. The Financial Services Commission emphasizes private sector-led innovation, while the BOK stresses bank-centered stability. Although stakeholders agreed that commercial banks would hold a majority (50%+1 share) of the consortium equity as the issuer of a won stablecoin, the legislation in the first half of this year has also fallen through, overshadowed by the local elections on the 3rd of next month.
The Democratic Party of Korea has pledged to pass the Digital Asset Basic Act (phase-two virtual asset law) in the National Assembly in the second half of this year. Lawmaker An Do-geol of the Democratic Party of Korea said at the "Policy debate for the spread of stablecoins and the reorganization of the financial system," held at the National Assembly Members' Office Building on the 27th, "The Digital Asset Basic Act is in the final coordination stage over several issues. We expect it to be discussed with speed in the National Assembly in the second half of the year."