It is difficult to agree easily with the assertion that a won-based stablecoin should be introduced to reduce the dominance of the dollar.
Korean Bank Deputy Governor Yoo Sang-dae mentioned this during a press briefing held on the 24th in the Conference Room on the 2nd floor of the Bank of Korea's annex in Jung-gu, Seoul, when asked about the necessity of introducing a won stablecoin. He made this statement based on his personal opinion, refuting industry claims that a won stablecoin should be issued to protect currency sovereignty in response to the spread of dollar stablecoins.
A stablecoin refers to cryptocurrency designed to minimize price volatility. It is typically pegged 1:1 to fiat currencies such as the U.S. dollar or the euro, usually maintaining a value of 1 coin to 1 dollar. Dollar-based stablecoins, such as Tether (USDT), are widely used in overseas remittance and payment sectors instead of the dollar.
Deputy Governor Yoo stated, "The formation of dollar dominance is due to the dollar being a safe asset, not influenced by means that carry the value of the dollar, such as stablecoins," and added, "Just as people use dollars even when there is a won available, they will still use dollar stablecoins even if there are won stablecoins."
He also disagreed with the argument that there is an urgent need to issue a won stablecoin in this context. He responded with a question, "Is there a stablecoin issued by another country that is not a dollar?" and continued, "The situation in the U.S. is different. It is inappropriate to argue that because a dollar stablecoin has emerged, a won stablecoin must also be issued."
Deputy Governor Yoo mentioned that the Bank of Korea's stance on stablecoins is cautious. He expressed basic agreement with the potential innovation capabilities of stablecoins but noted, "However, issuing a won stablecoin may conflict with the fundamental position of the Bank of Korea regarding capital liberalization." This implies that allowing a won stablecoin could accelerate capital outflows due to increased inter-country capital movement.
Considering these points, he argued that the introduction of stablecoins should be gradual. Deputy Governor Yoo suggested, "Even if a won stablecoin is introduced, it would be desirable to initially allow issuance centered on banks with high regulatory levels and then gradually expand to the institutional sector of non-banks," adding, "Once the government organization is established, I will consult with relevant ministries."
He mentioned that the Bank of Korea will continue to promote its project on 'Central Bank Digital Currency (CBDC)' as a countermeasure to stablecoins. Currently, the Bank of Korea is participating in global payment improvement projects based on CBDC, such as the Agora project, while also conducting a CBDC practicality test, called 'Project Han River,' targeted at domestic consumers.
Deputy Governor Yoo stated, "The first pilot test will be nearly completed this month, and we are in the stage of preparing for the second pilot test," adding, "However, since the government's position on stablecoins is not clearly established and there is significant uncertainty regarding related laws and policies, the timing for operating the second pilot test will be determined through consultation with banks."
He indicated that he would mention the need to strengthen the Bank of Korea's supervisory authority over non-bank financial institutions during a report to the Presidential Committee on Policy Planning scheduled for the 26th. Deputy Governor Yoo said, "If I were to ask for opinions regarding the government reorganization, I would say that the Bank of Korea should play a role in terms of lending to non-bank financial institutions, as well as inspection, supervision, and data submission requirements."
Regarding the recent economic situation, he noted that they are watching the increase in household debt. Deputy Governor Yoo expressed concern, stating, "In certain areas of Seoul, while housing prices are rising rapidly, the resulting increase in household debt is worrisome," emphasizing once again that a conflicting relationship exists between price stability and financial stability as policy goals.
In terms of domestic demand, he diagnosed that private consumption is showing signs of improvement, but investment lethargy continues. He stated, "Currently, various responses to domestic recession are being implemented on the fiscal side, indicating that there are overall signs of improvement in private consumption," but added, "However, the sluggishness in construction investment seems likely to continue into the second half of the year."
In the long term, he predicted that structural factors such as low birth rates and an aging population will impact the real economy. Deputy Governor Yoo stated, "As demographic changes cause a significant decline in the long-term real equilibrium interest rate, the capacity for monetary policy is being restricted," and added, "In a situation where potential growth rates are declining, it is essential to examine the overall operational framework of monetary policy, including its goals, means, strategies, and communication, to mitigate economic fluctuations."