As multiple bills related to stablecoins have been proposed, discussions on legislation have gained momentum, with the Bank of Korea expressing concerns about financial stability and launching a comprehensive response. It continues to participate in various international events related to stablecoins and has strengthened its internal response system through organizational restructuring to enhance its capabilities.
According to the Bank of Korea on the 18th, Park Jun-hong, Head of Team at the Bank of Korea's Payment Policy Team, participated in a panel discussion at the stablecoin symposium titled "The Future of Stablecoins and Financial Markets: Regulation, Stability, Innovation" held on the afternoon of the 13th at Seoul National University, organized jointly by the Korea Institute of Finance, the Korean Securities Association, and the Korean Finance Association.
This symposium was arranged for experts from various fields, including finance, law, policy, and industry, to discuss the economic effects and legal challenges of stablecoins. During the event, Park stated, "Stablecoins inevitably influence monetary policy by substituting for currency and can impact financial stability during a coin run (mass withdrawals)," and argued that it is rational to form a consortium centered around banks, allowing participation from technologically capable non-banks.
He also proposed a type of stablecoin known as a central bank digital currency (CBDC) for institutional use and deposit tokens issued by each bank based on it as alternatives. Park mentioned, "Deposit tokens are stablecoins issued by banks based on distributed ledger technology, carrying significant credibility as they are issued by banks, ensuring stability," stating that the CBDC would function as a stable payment medium.
A CBDC is an electronic form of legal tender issued by the central bank. Depending on usage, it is divided into retail for individuals and corporations and wholesale for transactions between financial institutions. The Bank of Korea is currently promoting the adoption of wholesale CBDCs, and is also working toward the commercialization of deposit tokens issued by each commercial bank. This is seen as a strategy to respond to private sector-led stablecoins.
The Bank of Korea is set to participate in a session on central bank digital currency (CBDC) at the 'World Economists Conference' being held at COEX in Seoul from the 18th to the 22nd. The session on the 21st will focus on 'Current Status of CBDC,' featuring speakers including Yoon Seong-kwan, head of the Digital Currency Division at the Bank of Korea, and Shin Hyun-song, chief economist at the Bank for International Settlements (BIS), along with David Andolfatto, a professor at Miami University.
With the imminent entry of stablecoins into the legal framework, the Bank of Korea is expressing concerns through various external events due to the potential threats to the central bank's monetary policy and financial stability. Governor Lee Chang-yong pointed out at a press briefing on monetary policy direction held on the 10th of last month, "If multiple non-bank institutions create stablecoins, it amounts to the emergence of various private currencies," stating that it would be challenging to implement monetary policy efficiently in such a country.
The possibility of inflation triggered by an increase in the money supply is also a concern for the Bank of Korea. Go Kyung-cheol, head of the Bank's Electronic Finance Team, participated as a discussant at a policy discussion on stablecoins held at the Capital Market Research Institute on the 23rd of last month, expressing concern that, "If the Korean won stablecoin is viewed in the broad sense of currency, the central bank cannot intervene in its issuance, possibly affecting inflation," while mentioning the need for regulation.
Alongside this, the Bank of Korea recently strengthened its internal response system through an organizational restructuring. The Bank has changed the name of the department dedicated to CBDCs from 'Digital Currency Research Office' to 'Digital Currency Division' earlier this month, indicating its intent to move beyond research and push for the commercialization of CBDCs. The subordinate Digital Currency Technology Team 1 and Digital Currency Technology Team 2 have been reorganized into 'Digital Currency Technology Team' and 'Digital Currency Infrastructure Team', respectively. A new 'Virtual Asset Team' responsible for responding to stablecoin policies has also been established within the Financial Settlement Bureau.
A Bank of Korea official noted, "As the stablecoin issue has surfaced, there were limits to responding with the existing organization, so we created a team dedicated to virtual asset work," adding that it plans to handle tasks from external cooperation with government agencies such as the Ministry of Economy and Finance and the Financial Services Commission, to research and investigation.