Written by: Fang Jiayao, Wall Street Insight
On Tuesday, Bank of Korea Senior Deputy Governor Ryu Sang-don stated that the introduction of a won-denominated stablecoin should be gradual, starting with commercial banks under the strictest regulation issuing won stablecoins, and then gradually opening up to non-bank institutions. This stance marks an important step in South Korea's digital currency regulatory framework construction.
Starting with Bank Pilot
Ryu Sang-don emphasized at the press conference that the introduction of stablecoins could have a significant impact on monetary policy and payment settlement systems, and therefore must establish a comprehensive safety mechanism to prevent financial market volatility and protect user rights.
Ryu Sang-don also echoed the concerns of Bank of Korea Governor Lee Chang-yong about capital flows and financial stability. Last Wednesday, Governor Lee warned that while he does not oppose issuing a won stablecoin, he fears that such a move might backfire - not only failing to reduce dependence on US dollar stablecoins but also complicating foreign exchange controls and threatening the effectiveness of monetary policy.
Currently, the government led by President Lee Jae-myung is accelerating the legislative process to implement its campaign policy promise of allowing companies to issue won stablecoins. The ruling Democratic Party has proposed a draft bill aimed at establishing a sound regulatory foundation to ensure South Korea does not fall behind in the digital currency field.
Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged 1:1 with the US dollar. Cryptocurrency traders use them to transfer between different currencies, and they are gradually being adopted by enterprises.
In addition to the stablecoin issue, Ryu Sang-don also noted that rising housing prices and increasing household debt are becoming a focus for the central bank. With inflation declining, the Bank of Korea has shifted to a loose policy, with last month's interest rate cut bringing the policy rate to the midpoint of the neutral range.
Ryu Sang-don also stated that rising housing prices and household debt issues are becoming a new focus for the central bank. The Bank of Korea is currently in an easing cycle, with last month's interest rate cut bringing the policy rate to the midpoint of the neutral range.
He also revealed that the Bank of Korea plans to consult with major commercial banks to prepare for the second round of central bank digital currency pilot testing. The first round of pilot testing will end next week, and the project is a joint initiative with the Bank for International Settlements, starting in late 2023.
Meanwhile, considering the digitalization trend, South Korea is also promoting internationalization reforms of its local currency market, further opening up to foreign investors. Over the past year, regulators have extended market trading hours and relaxed market access conditions for foreign investors.
