[Korean Won Stablecoins Part 2] Facing 'Triple Challenges' of Regulation, Demand, and Talent from the Start

Competition Intensifies Among South Korean Finance and Fintech Firms Amid Global Stablecoin Surge Challenges for KRW-Based Stablecoins: Monetary Policy Risks and Structural Barriers With legislative discussions on stablecoins gaining momentum in South Korea, the market is a blend of optimism and caution. Known for their technological advantages such as rapid transactions, low fees, enhanced accessibility, and transparency, stablecoins are drawing significant interest from the financial and fintech industries. However, the structural limitations of KRW-based stablecoins, alongside a lack of infrastructure and skilled experts, present significant challenges. Domestic Firms Rush to Secure Stablecoin Trademarks Amid Global Surge South Korea’s private sector is closely monitoring the global stablecoin market's rapid growth. According to the KIPRIS national patent information platform, Toss (formerly Viva Republica) filed 24 stablecoin-related trademarks on September 27, including terms like ‘KRWV,’ ‘TKRW,’ ‘KRVV,’ and ‘TOSSKRW.’ These trademarks cover digital financial transactions, electronic fund transfers, and remittance services. Other major players like Kakao Pay, KB Kookmin Bank, and Hana Bank have also filed their own stablecoin trademarks, indicating their intent to dive into this growing market. The increasing interest aligns with the booming global stablecoin market. A Yuanta Securities report, "The Completion of the Digital Economy: KRW Stablecoins," released on August 30, revealed that stablecoin-linked payment volumes rose from roughly $2 billion in January 2023 to about $6 billion in February 2024, signifying substantial growth. From January 2023 to March 2024, the cumulative transaction size is estimated at $94.2 billion. Yuanta attributes this growth to real-world use cases that drive both B2B (business-to-business) transactions like cross-border payments, supplier settlements, and collateral transfers, and B2C (business-to-consumer) transactions, where stablecoin payments are gaining traction for their efficiency. Not a Reserve Currency—Concerns Over Monetary Policy Collisions Despite the global stablecoin market's exponential growth, KRW-based stablecoins face significant hurdles. The Korean won does not enjoy the reserve currency status of the U.S. dollar, which hampers natural demand. Additionally, concerns about the potential macroeconomic impact of a digital currency on South Korea’s financial system are rising. The Bank of Korea has highlighted that any unexpected influx of digital KRW could disrupt the effectiveness of its monetary policies, warning that, “An influx of digital currency in an environment where liquidity is managed through policy interest rates could undermine the credibility of monetary policies.” Experts believe overcoming these challenges requires simultaneous development of both domestic and international use cases, along with measures like interest payment models to stimulate demand and increased security for reserve assets. Minho Lim, a researcher at Shin Young Securities, emphasized the need for “Flexible issuance frameworks led by private entities like brokerages, fintech firms, and Web3 startups.” Lim added that robust public blockchain infrastructure operating 24/7 is essential, and incentives such as interest-bearing mechanisms or platform rewards could increase consumer appeal. He also recommended diversifying reserve assets to include government bonds, monetary stabilization bonds, and money market funds (MMFs), managed transparently and securely. Talent Scarcity and Infrastructure Inadequacy: Hurdles for Commercialization While regulation, market demand, and infrastructure are crucial for KRW-based stablecoins' success, a chronic shortage of specialized human capital remains a major obstacle. According to the Korea Internet & Security Agency (KISA)’s "2024 Blockchain Industry Status Report," released in January 2023, South Korea’s blockchain sector employment grew 16.4% year-on-year to a record 3,961 professionals in 2023, yet the industry still struggles with a lack of expertise. A survey of 337 blockchain companies revealed that 54% cited a "shortage of specialized blockchain talent" as their primary operational challenge. An anonymous source from the digital asset sector mentioned, "One of the biggest difficulties in pursuing stablecoin projects domestically is the limited pool of talent capable of managing planning and operations effectively. Regulatory compliance, risk management, and technical development all require specialized expertise, which is hard to find." Seungsik Yoon, a researcher from Tiger Research, echoed these concerns: “The technical aspects of stablecoin issuance are relatively straightforward. However, successful financial operations and sufficient reserves are critical. Above all, designing a clear use case that convinces consumers why they should adopt this stablecoin is key.” --- As South Korea’s financial and fintech ecosystem vies for stablecoin dominance, the race is about aligning with global growth trends and addressing domestic structural inefficiencies. Developing resilient infrastructure, securing necessary talent, and managing regulatory and monetary risks will ultimately determine the competitiveness of KRW-based stablecoins on the global stage.