South Korea Explores Stablecoin Regulation Amid Market Pressure

South Korean financial authorities are weighing approvals for domestic stablecoin issuers as market demand grows. Bank of Korea Governor Lee Chang-young acknowledged the pressure to allow virtual asset investments, signaling potential regulatory shifts. A new registration system may emerge to facilitate institutional crypto adoption.

Tokenized deposits could dominate domestic payments while won-pegged stablecoins may serve cross-border transactions, Chang-young suggested at the Hong Kong forum. The governor expressed particular concern about dollar-linked stablecoins enabling capital Flow circumvention when paired with Korean won alternatives.

Regulatory challenges loom large as non-bank entities flood the stablecoin market. Chang-young warned of exchange-rate triggered capital flights into dollar stablecoins, which offer cheaper transactions than traditional forex channels. The remarks highlight Korea's delicate balancing act between innovation and financial control.