"Building Stablecoin Ecosystems Over Issuance: Integrate Capital Market Design with Practical Use"

# Stablecoin Issuance Reaches Crucial Turning Point, Experts Emphasize Market-Driven Model Stablecoin issuance is no longer a topic of mere preliminary exploration but has advanced to a stage where strategic planning and practical implementation are essential, according to Kang Hee-chang, Product Lead at Populous. Speaking on October 28 during the “Blueprint for a Korean-Won Stablecoin for Digital G2” seminar at Hashed Lounge in Gangnam, Seoul, Kang highlighted the importance of adopting a capital markets-centric design to ensure stablecoins function effectively and maintain continuous operations within the market. “It’s no longer about debating whether issuance should be allowed or not. Strategic planning for a capital market-driven model is now imperative,” Kang emphasized. # Capital Markets Model for Stablecoins: Distinct from Deposit-Based Structures Kang elaborated that the capital market-driven model is fundamentally different from the traditional deposit-based approach involving banks. This new structure envisions the participation of diversified private-sector financial firms such as securities companies, asset management firms, and fintech players. Under this model, stablecoins would operate using short-term government bonds or cash-equivalent assets as collateral while covering operating costs through earned interest income. By ensuring a revenue-generating structure, this model could enhance essential infrastructure for accounting, risk management, and regulatory compliance. Kang argued that such a framework would go beyond mere issuance to create a functioning and sustainable ecosystem. “This model allows multiple stakeholders to participate, playing distinct roles and responding flexibly to market changes,” he noted. “Collaboration among specialized entities in different sectors is far more effective than concentrating all functionalities within one institution.” Kang also stressed the importance of establishing a system that can demonstrate both functionality and profitability in real market settings. “Moving beyond simply minting tokens is crucial,” he added. # Real-World Use Cases of Stablecoins: A Driver for Market Expansion Bok Jin-sol, Research Lead at Populous, emphasized the critical importance of creating real-world use cases for stablecoins. "Regardless of how sophisticated the issuance structure is, it’s pointless if the stablecoin cannot be used in practice," he stated. Bok identified areas like payments, remittances, and settlements as pivotal applications that could determine stablecoins' survival. Major corporations globally are already incorporating stablecoins into their payment infrastructures. For instance, PayPal integrates its PYUSD stablecoin into its app for payments, while payment platform Stripe has acquired stablecoin startup Bridge to offer financial account services. Other major companies, including JD.com, Meta, and Binance, are accelerating stablecoin adoption within their proprietary payment networks. “Payment methods bypassing card networks are gaining traction, significantly altering traditional fee structures,” Bok said. “This affects the entire payment ecosystem, from merchants and payment gateway providers to card companies, banks, and platforms.” Bok also noted that stablecoins’ impact extends beyond payments, influencing the broader financial system. "On global platforms handling multiple fiat currencies, we're witnessing rapid growth in stablecoin utilization," he added. Companies like SpaceX and ScaleAI, involved in frequent cross-border transactions, have already adopted stablecoins as a practical payment medium. # Implications for South Korea: Learning from Global Trends Both Kang and Bok suggested that South Korea should take cues from regions like Hong Kong and the U.S., where private sector-led stablecoin initiatives set the stage for subsequent regulatory frameworks. “The private sector should spearhead efforts to establish practical use cases for stablecoins in South Korea,” Kang said. Bok emphasized that stablecoins’ market relevance depends more on actual usage than on sophisticated design. “To secure their place as meaningful assets in the market, stablecoins must advance on both fronts—issuance and real-world application,” he remarked. # Regulatory Challenges: Current Legal Frameworks Fall Short However, implementing stablecoin initiatives within the current legal framework poses significant challenges, as highlighted by Kim Hyo-bong, an attorney at law firm Bae, Kim & Lee (BKL). “Stablecoins inherently carry dual characteristics as both payment instruments and investment assets, making it difficult to encompass them within existing laws,” Kim explained. “New legislation will ultimately be required to address issues like issuing entities, capital requirements, and redemption structures.” Kim underscored the need for a regulatory framework ensuring stablecoins are stable in value, readily redeemable, and capable of generating profits through asset management. “The existing legal structure is insufficient to address these requirements, necessitating a tailored regulatory approach,” Kim said. Key regulatory considerations include whether interest payments should be permitted, the separation of issuing and distribution roles, and conditions for fintech firms’ participation. “A regulatory structure dividing functionalities among multiple entities could reduce compliance burdens,” Kim explained. “Ultimately, the market’s success will hinge on the regulatory framework details.” # Stakeholders Convene to Discuss the Way Forward The seminar, hosted by Hashed Open Research, gathered financial and blockchain experts alongside policymakers to discuss regulatory strategies for stablecoins. Discussions emphasized the importance of aligning innovation with regulatory clarity to realize the full potential of stablecoin ecosystems. Experts agreed that stablecoins are poised to play a transformative role in both national and global financial systems, provided the right strategies and frameworks are in place for their successful issuance, adoption, and regulation.