The Bank of Korea (BOK) published a white paper compiling its past research on stablecoins and argued that a won-denominated stablecoin should be issued mainly by the banking sector. It further argued that a consultative body with participation from the currency, foreign exchange, and financial authorities should decide the coin's issuance volume and that deposit tokens should be included in the reserve assets.
The Bank of Korea (BOK) stated accordingly in a report on the 27th titled Money in the digital age, balancing innovation and trust: key issues and responses for a won stablecoin. This report is the BOK's first official research report on stablecoins.
The Bank of Korea (BOK) acknowledged the convenience and innovativeness of a won stablecoin but expressed concern that it could negatively affect the existing payment system. The risks include: ▲ "depegging," where the value linkage breaks ▲ digital bank runs ▲ consumer protection gaps ▲ erosion of the separation of banking and commerce ▲ circumvention of foreign exchange and capital regulations ▲ weakened currency policy effectiveness ▲ weakened intermediation function.
The Bank of Korea (BOK) stressed that a won stablecoin should be issued mainly by the banking sector. The rationale is that banks are already subject to strict capital, foreign exchange, and anti-money laundering (AML) regulations, which can minimize risks that may arise from the introduction of stablecoins.
The Bank of Korea (BOK) said, "If banks become the issuer of stablecoins, or if issuance is pursued through a consortium centered on the banking sector, a significant portion of the issues mentioned earlier can be managed within the current regulatory framework," adding, "Nonbank companies such as IT firms can join a bank-centered consortium to drive innovation and growth."
The Bank of Korea (BOK) also argued that a policy consultative body jointly participated in by the currency, foreign exchange, and financial authorities should be formed to decide together on key matters such as issuer eligibility, issuance volume, and reserve asset composition standards. It emphasized that decision-making should be conducted through a consensus body, such as unanimity among participating institutions.
It said the payment of interest on stablecoins should be prohibited. If stablecoins offer interest, they would compete directly with bank deposits and could negatively affect traditional financial intermediation. According to the Bank of Korea (BOK), major jurisdictions such as the United States and the European Union (EU) are designing policies to restrict or ban the payment of interest on stablecoins.
It also proposed pursuing stablecoin issuance in parallel with the commercialization of deposit tokens. A deposit token is a virtual asset issued on the basis of bank deposits and, like stablecoins, is a programmable means of payment.
The Bank of Korea (BOK) said, "Deposit tokens can realize the potential of a won stablecoin, such as programmability, P2P payments, and settlement support for tokenized assets, while curbing the evasion of capital and foreign exchange regulations," adding, "They can be an alternative that leverages the technical advantages of stablecoins while maintaining public trust."
It further argued that deposit tokens should be included in the reserve assets of a won stablecoin. The explanation is that, because a deposit token is a coin issued based on deposits on the Bank of Korea (BOK) Blockchain network, it can respond stably even in a coin-run situation.
The Bank of Korea (BOK) said, "If part of the private stablecoin's reserve assets is held as deposit tokens within a Blockchain network built by the Central Bank, it would be possible to automate the issuance and redemption procedures of the stablecoin and secure transparency and reliability regarding the status of reserve asset holdings."