South Korea Endorses Bank-led Stablecoin Consortium Model for Institutional and Global Expansion

South Korea’s Financial Services Commission (FSC), led by Vice Chairman Kwon Dae-young, has endorsed the adoption of a bank-led consortium model to institutionalize stablecoins, emphasizing balanced progress between innovation and stability. This announcement, made during a National Assembly audit on October 20, aligns with growing legislative efforts to solidify the digital asset landscape in the country. The FSC’s approach seeks to address risks while capitalizing on the potential applications of stablecoins beyond mere trading activities.

Strengthening Stability Through Stringent Capital Requirements

During the audit, Democratic Party lawmaker Yoo Dong-soo proposed critical measures for ensuring a stable market environment for South Korean stablecoins. Yoo highlighted the necessity of higher capital thresholds for providers, recommending at least KRW 5 billion to enhance systemic stability, as opposed to the KRW 500 million to KRW 5 billion range currently specified across the six pending stablecoin-related bills under legislative review. This adjustment is aimed at mitigating significant risks such as reduced shareholder returns, diminished monetary policy efficacy, compromised public trust in payment systems, financial instability, and the evasion of foreign exchange regulations.

In response, Kwon Dae-young stressed the importance of incorporating robust safeguards within the institutional framework. He noted the collaborative efforts underway between the government bodies to finalize and propose new digital asset legislation to the National Assembly before the close of the year. "Stablecoins aren’t limited to trading alone; they hold value for use in payments and remittances as well. To ensure broader adoption and utility, we are working with industry experts to seize their application potential while crafting a secure regulatory framework," Kwon stated.

Enlarging South Korea's Global Stablecoin Footprint

As stablecoins continue to see exponential global growth, South Korea is aiming to ensure its own competitiveness. Representative Yoo Dong-soo underscored this urgency, citing the global stablecoin market’s capitalization of $309.7 billion as of October, with a predominant share belonging to dollar-backed stablecoins (over 80%). He urged South Korean policymakers and regulators to lay the groundwork for Korean won-based stablecoins capable of competing on the international stage.

Echoing Yoo’s concerns, FSC Chairman Lee Eok-won elaborated on the evolving use cases for stablecoins and the need for proactive preparation. “Stablecoins are no longer confined to digital asset trading; their scope is expanding into payments, remittances, and global financial integration. By responding to overseas demand and fostering innovation, we aim to position Korean stablecoins competitively abroad,” Lee remarked. He added that experts are actively participating in evaluating both regulative protocols and practical applications, aiming to minimize risks associated with the technology while enabling its advancement.

Institutionalizing Stablecoins: Swift Actions for Seamless Transition

To ensure streamlined integration into the financial ecosystem, the FSC has committed to expedited preparation for stablecoin legislation adoption and its subsequent implementation. Chairman Lee emphasized the importance of follow-up measures, including executive orders following the enactment of new laws. "Collaboration with relevant agencies is key to ensuring that South Korea swiftly adapts to stablecoin-centric innovations without unnecessary delays," Lee stated during discussions. He reiterated the government’s commitment to balancing regulations with financial innovation, fostering a regulatory environment conducive to growth while maintaining the integrity of financial systems.

South Korea’s institutionalization of stablecoins reflects a forward-looking approach that addresses market risks while unlocking significant opportunities. By leveraging a bank-led consortium model, the country aims to not only fortify stablecoin applications within domestic financial systems but also elevate its competitive standing in the global arena. Through collaborative legislative efforts, stringent safeguards, and expert-driven strategies, South Korea is paving the way for sustainable digital asset innovation.