South Korea’s Strategic Push to Solidify Position as a 'Digital G2' Leader

Global economic competition is intensifying, with the battle for supremacy extending beyond traditional industries like semiconductors and artificial intelligence (AI) to encompass emerging protocols for the digital economy and financial systems. Within this high-stakes landscape, South Korea is being urged to aggressively develop its Web3 industry to secure a leading position as a "Digital G2" power.

The Challenge of a Digital Exodus: Talent and Capital Flight

A report released on October 23 by Hashed Open Research (HOR), titled "Decision and Execution Strategies for Becoming a Digital G2,” puts a spotlight on South Korea’s most urgent challenge—the “Digital Exodus.” According to HOR, the absence of a clear regulatory framework and delays in key institutional reforms are driving Web3 startups and talent to relocate to overseas markets like Singapore, Hong Kong, and Dubai.

This exodus is triggering severe ripple effects: the loss of capital, diminished tax revenue streams, and the migration of technological expertise, all of which threaten South Korea’s economic sovereignty and long-term digital growth potential. If left unchecked, these trends could undermine the nation’s aspirations to become a globally dominant digital economy.

Blockchain and Stablecoins: Catalysts for Economic Transformation

Blockchain technology and stablecoins are reshaping the foundations of global economic systems, positioning Web3 industries as drivers of this transformation. HOR’s report emphasizes stablecoins and real-world assets (RWA) as pivotal elements of this revolution.

Data from digital asset research platform RWA.XYZ reveals that the total global issuance of stablecoins approached $270 billion as of last month, with over 99% of these stablecoins pegged to the U.S. dollar. HOR warns that the widespread adoption of dollar-backed stablecoins risks further entrenching the U.S. dollar as the default currency in the digital economy. This phenomenon, referred to as "digital dollarization," could weaken the Korean won's utility and, ultimately, erode South Korea’s monetary sovereignty.

Korean Won Stablecoin: Securing Financial Independence

To combat the risks posed by digital dollarization, HOR advocates for the rapid creation and legalization of a Korean won-based stablecoin. Such a domestic stablecoin would bolster South Korea’s fintech and payments ecosystem while opening new avenues for global investors to transact in Korean-won-denominated digital assets.

HOR also highlights tokenizing real-world assets like real estate and bonds as a pathway for South Korea to enhance liquidity and investment accessibility. By enabling atomic settlement, a method that allows simultaneous transaction execution and payment, tokenized assets could create secure and efficient financial systems. This strategy not only drives local market development but also has the potential to attract significant institutional capital inflows from abroad, further establishing South Korea’s financial market competitiveness.

Institutional Infrastructure: Lessons from Global Leaders

The report points to the recent approval of Bitcoin spot exchange-traded funds (ETFs) in the United States as a key benchmark for South Korea. HOR stresses that building robust institutional infrastructure—such as custodial services and ETFs for digital assets—is essential to enabling investment by professional investors and fostering institutional trust in Web3 industries.

By developing advanced financial frameworks to cater to the needs of institutional stakeholders, South Korea could align itself with global best practices and set the stage for achieving ‘Digital G2’ status.

Concrete Measures to Attain Digital Leadership

HOR’s policy recommendations offer a multi-pronged strategy for South Korea to solidify its position as a global digital economy leader:

• Legalization and adoption of a Korean won-backed stablecoin to retain monetary sovereignty and safeguard domestic markets.
• Development of sophisticated on-chain financial infrastructure, accompanied by modern risk mitigation systems.
• Institutionalization of tokenized real-world assets (RWAs) and regulatory reform to encourage institutional investment.
• Expansion of Web3-focused talent and industrial investments to drive innovation and scalability in the sector.
• Legislative action to create comprehensive frameworks governing digital assets and their use cases.

Public-Private Collaboration: A Critical Imperative

As the digital economy evolves rapidly, HOR underscores that overcoming these challenges requires a unified, urgent effort from government bodies, financial regulators, industry leaders, and academia. Collaboration between public and private entities is critical to ensuring digital sovereignty and maintaining competitiveness amidst fierce global economic competition.

An HOR representative pinpointed the stakes succinctly, stating, “Securing digital sovereignty amidst the fierce global economic competition is not a matter of choice but survival.” The report calls for accelerated action in building enabling infrastructure and crafting coherent policy frameworks.

South Korea’s ability to navigate this rapidly changing economic landscape will determine its future success in the digital economy and its position on the global stage. By fostering strategic collaboration and adapting quickly to digital transitions, the nation holds the potential to solidify its status as a "Digital G2," safeguarding both its economic sovereignty and its leadership in the Web3 era.