Capital Controls Limit Asia’s Stablecoin Ambitions, Hong Kong Stands Apart

As Korea Blockchain Week approaches, discussions about a Korean Won stablecoin have gained traction, reflecting broader regional aspirations to challenge the U.S. dollar's dominance in digital finance. Yet most Asian currencies remain shackled by capital controls, rendering them impractical for global stablecoin use. Hong Kong's dollar emerges as the sole exception—a freely convertible base for regional crypto innovation.

South Korean legislators are advancing a bill to authorize stablecoins, but explicitly reject the goal of internationalizing the Won. Post-1997 capital controls, designed to prevent financial outflows, make offshore circulation impossible. The specter of dollarization via tokens like USDT—visible in South America—looms large in policymakers' reluctance.

Bank of Korea Governor Rhee Chang-yong maintains cautious support for Won-pegged tokens, though foreign convertibility concerns persist. The very regulations preserving monetary sovereignty also constrain utility: unrestricted offshore Won circulation risks repeating 1997's capital flight crisis without jurisdictional carve-outs.