Bank of Korea Governor Warns of Risks in Private Stablecoin Issuance

The Governor of South Korea’s central bank has voiced serious concerns over the potential issuance of won-backed stablecoins by non-bank entities, warning that such a move could disrupt monetary control and create instability in the financial system.

Speaking after the Bank of Korea’s Monetary Policy Committee opted to maintain the country’s key interest rate at 2.50%, Governor Lee Chang-yong said the idea of private institutions issuing won-denominated digital tokens could resemble the fragmented currency systems of the 19th century. “It would be extremely difficult to carry out effective monetary policy,” Lee said, cautioning that a fragmented issuance system could pressure the nation to return to a more rigid central banking structure.

Lee also raised red flags about the implications for South Korea’s current foreign exchange framework and how stablecoin systems could erode traditional bank revenue models. Allowing non-banks to issue money-like instruments and facilitate settlements could weaken state oversight over capital flows and currency valuation.

Although South Korea’s central bank sees the urgency of stablecoin regulation, Lee stressed that the central bank alone cannot determine the path forward. Instead, he called for a collaborative decision-making process involving other government ministries, highlighting ongoing tensions between the Bank of Korea and the Financial Services Commission (FSC).

Despite Lee’s reservations, the broader government appears open to digital currency innovation. President Lee Jae-myung’s administration has expressed support for legalising won-based stablecoins, placing regulators in a tough balancing act.

In response, the BOK has adopted a sandbox model, permitting limited testing of stablecoin infrastructure in partnership with banks, fintech firms, and exchanges. The initiative aims to foster innovation while safeguarding monetary authority as the country moves toward the enactment of its Digital Asset Basic Act.