South Korea’s Bold Move: Limiting Won-Stablecoin Issuance to Bank-Led Consortia with 51%+ Stake
South Korea tightens the leash on stablecoins—banks now call the shots.
Regulators are drafting rules that could reshape the country's crypto landscape. The proposal? Only consortia where commercial banks hold at least a 51% stake get to issue won-pegged stablecoins. It's a power play that puts traditional finance firmly in the driver's seat.
The Banker's Veto
Forget decentralized dreams. This framework hands majority control to established banking institutions. Any aspiring stablecoin project must now secure a bank as a majority partner. It sidelines pure crypto-native ventures and startups lacking deep banking relationships.
The move aims to inject 'stability' into stablecoins by backing them with trusted, regulated entities. Critics see it as a gatekeeping maneuver—another case of old finance building a moat around new technology.
Market Impact and Innovation Chill
Expect consolidation. Smaller players without bank alliances may get squeezed out or forced into mergers. The rule could slow the pace of innovation, as navigating bank partnerships adds layers of bureaucracy and compliance.
On the flip side, it might lure conservative capital into the space. Institutional investors often prefer systems where familiar names hold controlling stakes. This could legitimize won-stablecoins for a broader, more risk-averse audience.
South Korea's approach mirrors a global regulatory trend: taming crypto's wilder aspects by grafting them onto traditional financial structures. Whether this fosters safer growth or stifles the very disruption that makes crypto compelling remains to be seen. After all, nothing says 'innovation' like requiring a permission slip from a banker.
Banks lead, fintechs follow in the proposed consortium
Under the new framework, stablecoin issuers will take the FORM of a consortium, with banks holding at least 51% of the shares.
Speaking after the meeting, Kang Junhyun, the Democratic Party’s secretary of the National Assembly’s Political Affairs Committee, confirmed what was discussed in the meeting, stating, “The controversial issue of who will issue stablecoins has been resolved in a ‘consortium format’ by coordinating the positions of the Bank of Korea, the Financial Services Commission, and the banking industry.”
South Korea’s regulatory and political deadline
Lawmakers went on to impose a deadline on the government, demanding that the government submit a draft bill containing the main framework by December 10.
Kang stated that “if the government proposal is not submitted by this deadline, we will push forward with legislation initiated by lawmakers through the Political Affairs Committee.”
According to statements made by Kang, lawmakers are going to quickly share and propose the finalized bill and then go through a public debate process with the Digital Asset Task Force within the Democratic Party.
He stated, “Even if discussions are possible within this year, the actual passage of the bill will likely happen in January next year. I am not sure what the opposition (People Power Party) thinks, but the discussion process seems likely to take some time.”
Diverging views as consortium plan is not yet finalized
Last month, the country’s central bank, Bank of Korea (BOK), warned that non-bank stablecoin issuers could threaten monetary policy, deposit-protection frameworks, and financial stability.
It argues that such entities WOULD essentially be acting like narrow banks, where they issue currency and also offer payment services. It seems the consortium arrangement is an answer to the apex bank’s concerns.
However, the stablecoin ecosystem, including some fintech advocates and industry stakeholders, says that limiting issuance to banks may hinder innovation and competition.
They argue that strictly bank-dominated stablecoin issuance would reduce such coins to little more than digital bank deposits, impacting potential use cases, from cross-border payments to decentralized finance applications.
Moreover, even after the December 1 meeting, the FSC issued a statement noting that “no decision had been finalized” regarding the consortium plan, indicating that the regulatory framework is yet to get the consensus of all parties involved. Attention will now be on the government’s response to the ultimatum the lawmakers have given it.
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