Will it take until 2027 to be implemented? A deep analysis of the capital game behind the difficult birth of the Korean won stablecoin.

Title: Will It Take Until 2027? In-Depth Analysis of the Capital Game Behind the Difficult Birth of the Korean Won Stablecoin

Author: Four Pillars

Compiled by: Tim, PANews

Key points:

• What is the current status of the development of the Korean won stablecoin? Let's analyze the positions and latest developments of the Korean government, parliament, and the business community.
• The essence of stablecoins can be summarized as a game of "net inflow versus net outflow." Blockchain technology has expanded the inclusiveness of financial services, and for governments and enterprises in various countries, the core issue is whether this enhanced inclusiveness will attract more capital inflows or lead to more capital flight. All policies and strategies must be formulated based on this deduction.
• Within the framework of "net inflow and net outflow", the Korean won stablecoin poses a tricky challenge for policymakers and businesses. However, the global financial system has begun to tilt towards blockchain. If South Korea hesitates, it may be left far behind in the wave of financial innovation.

####1. Legislative processes take a long time.

Currently, South Korea has proposed five independent bills related to the Korean won stablecoin. Members of the ruling Democratic Party, Min Byung-deok, Ahn Doo-cheol, Kim Hyun-jung, and Lee Gang-il have submitted proposals. Opposition party National Power Party member Kim Eun-hye has also proposed a bill. Although the general framework of the five drafts is similar, there are differences in details, such as the qualifications of the issuers, whether interest payments are allowed, and collateral requirements.

In addition to the legislation from lawmakers, the Financial Services Commission (FSC) of the South Korean government is also preparing to launch the second phase of digital asset regulations, which will include stablecoin regulatory provisions. As the FSC will ultimately have the highest regulatory authority over stablecoins pegged to the Korean won, the industry is closely watching the upcoming draft regulations.

Unlike in the United States, in South Korea, if the legal framework for financial products has not been established, companies can hardly conduct any business in practice. Therefore, the most critical issue for companies is when the legislation for the Korean won stablecoin can actually be passed.

According to the legislative activity report of the 21st National Assembly of South Korea, the average approval time for government proposals is 435.2 days, while the average processing time for member proposals is 657.1 days. The stablecoin bill that the Financial Committee plans to submit in October 2025 falls under the category of government proposals. Even based on this timeline, the actual implementation of the Korean won stablecoin legislation is likely to be delayed until early 2027. This means that before then, South Korean companies and even foreign blockchain projects will hardly be able to advance specific business plans.

####2. Favorable for private blockchain

From the very beginning, we have advocated that for South Korea's blockchain industry to truly develop, it must issue a Korean won stablecoin on public chains such as Ethereum or Solana. However, at this point, this vision seems difficult to achieve.

The two public institutions expected to be responsible for regulating the Korean won stablecoin are the Financial Services Commission of South Korea and the Bank of Korea. The central bank's position is clear: there is a need to launch a Korean won stablecoin, but there is no reason to rush. They prefer to start with a private blockchain and gradually expand. The newly appointed chairman of the Financial Services Commission even stated that South Korea should build its own custom blockchain and issue a stablecoin based on it.

Their position is not without reason. Unlike the US dollar stablecoin, the South Korean won stablecoin faces high entry barriers due to foreign exchange regulations and the risk of capital flight. From the perspective of national economic management, it is indeed difficult to control the direct issuance of the South Korean won stablecoin on a public chain.

South Korea is one of the few countries in the world that does not rely on Visa and MasterCard for domestic payments, but prefers to use its own payment system. This country is still deeply affected by the trauma of the 1997 foreign exchange crisis. As a result, regulators prefer to keep the economy under predictable control. Therefore, it seems very likely that the Korean won stablecoin will be launched on a private chain rather than a public chain.

For those who support the development of the Korean blockchain ecosystem, this direction is disappointing. However, domestic system integrators and global blockchain foundations can still find opportunities in it.

Local system integration companies in South Korea are expected to undertake blockchain construction projects tailored for stablecoin issuance. A notable example is LG CNS, an IT service subsidiary of the LG Group, which has built the blockchain infrastructure for the central bank digital currency pilot for the Bank of Korea.

Public chain projects can still provide technical support for the issuance and distribution of the Korean won stablecoin in private networks. Avalanche subnets and Arbitrum Orbit are typical examples. Any team with experience in building and operating large public chains should be able to easily tailor such solutions for Korea.

The utility of stablecoins mainly comes from their existence on public networks. For the Korean won stablecoin to be competitive, it must either be built on a public chain from the start or be unable to achieve it due to political constraints, but ultimately it must also expand to the public chain.

If the issuance is limited to a private network, then the only possibility for the success of South Korea's characteristic blockchain is: a state-operated private network must be established, and all financial services, stablecoin, tokenized assets, platform points, and other products must be connected to this network.

From a technical perspective, such a model will maintain privacy, but for South Korean citizens and the domestic market, it can simulate the user experience of a public chain. Through a wallet and a Korean won stablecoin, users can integrate remittances, payments, stock trading, and cryptocurrency trading on a single platform. This seems to be the only way to satisfy the needs of the government, the blockchain industry, and users simultaneously.

Will the Korean won stablecoin be allowed to be issued on the public chain? We can only wait and see. But the worst-case scenario is clear: multiple private networks emerge in South Korea, thereby fragmenting the financial system.

####3. Enterprises in a wait-and-see mode

South Korean media has headlines almost every day reporting that a certain company is applying for a trademark for the Korean won stablecoin or another company is considering launching stablecoin business. However, from an external perspective, the reality seems quite different. In South Korea, companies' attitudes towards the Korean won stablecoin are divided into two factions.

The first category of factions is the proactive group. Generally speaking, the smaller the enterprise scale, the more positive the attitude towards launching the Korean won stablecoin business. There are multiple reasons behind this: compared to large conglomerates, small enterprises face less regulatory risk, and coupled with the popularity of the topic itself, getting involved in stablecoins can also generate significant public relations effects.

But the problem is that stablecoins are a scale-economy business. On the issuance side, success requires increasing supply to establish high liquidity and network effects. On the circulation side, it is necessary to attract a large number of users and merchants to create real utility. Small businesses can enter the market, but they will encounter bottlenecks in scalability. Their best opportunities lie not in the core issuance or circulation segments of the value chain, but in the peripheral service areas.

The second category of camps is the cautious faction. The larger the company, the more likely it is to adopt a wait-and-see approach and take an extremely prudent stance. This cautious attitude mainly stems from two reasons: first, legal uncertainty. As mentioned earlier, the legislative process for the regulation of the Korean won stablecoin is expected to take one and a half to three years. In the Korean market environment, it is nearly impossible for large enterprises to proactively launch stablecoin services before the regulatory framework is established.

The second reason lies in commercial viability. Unlike the US dollar stablecoin, which serves a large global market, the Korean won stablecoin essentially falls within the domestic market category. For large enterprises that have successfully conducted domestic financial business, the actual benefits that could be brought about by transitioning to blockchain and stablecoins may not be sufficiently attractive.

####4. The short-term bond market in South Korea is small: Is it possible to issue collateralized stablecoins?

Tether is the issuer of USDT, holding $130 billion in U.S. short-term Treasury bills and repurchase agreements. Circle is the issuer of USDC, holding $63 billion in money market funds. In contrast, South Korea does not issue government bonds with maturities of less than one year. The government occasionally issues treasury funding bills to meet temporary funding needs, but their total scale is only about $7 billion.

This means that the market size of short-term bonds that can serve as collateral for the Korean won stablecoin is too small, constituting a fundamental issuance barrier. Recently, the Korea Capital Market Institute proposed the idea of issuing short-term government bonds specifically for stablecoin issuance, but the Bank of Korea immediately refuted this and issued a warning about the concept, suggesting that monetary stability bonds could be used as an alternative.

These bonds issued by central banks, used to absorb market liquidity, typically have maturities of less than three years, with some even as short as three months, and their overall scale is considerable, possessing the potential to become an alternative option. However, even so, the scale of this market is still quite small.

Aside from scale, both government bonds and stable bonds face another issue of insufficient attractiveness as collateral: yield. The average yield of U.S. short-term bonds is around 4%, while the yield of South Korean government bonds and stable bonds is only slightly above 2%. For issuers, this lower yield significantly undermines the motivation to operate the Korean won stablecoin business, not to mention that its issuance scale is already much smaller than that of the U.S. dollar stablecoin.

####5. Other misconceptions about the Korean won stablecoin

Regarding the Korean won stablecoin, there are also some misconceptions in the Korean market that need to be corrected.

First of all, the risks of issuing stablecoins on public networks have been exaggerated. Even if the Korean won stablecoin is issued on a public chain, the rules defined by regulators and issuers can still be directly enforced through smart contracts. For example, transactions can be limited to Korean users who have completed real-name verification. Securitize has already demonstrated the feasibility of this model through tokenized securities like BUIDL, which fully comply with regulatory requirements through smart contract logic. This means that the Korean won stablecoin can circulate on public networks while allowing regulators to comprehensively monitor the flow of funds and prevent unforeseen situations.

The second misunderstanding is that, as a highly developed financial market, the adoption of the Korean won stablecoin has a negligible impact on user experience. This viewpoint is only half correct. Indeed, Korea's fintech infrastructure is very advanced, and users can easily access various financial services through multiple platforms. From this perspective, blockchain-based stablecoins may not bring a significant leap in convenience, but they will bring several important advantages:

• Cross-platform interoperability: Nowadays, financial services are not only fragmented across platforms like Naver, Kakao, Toss, and Upbit, but there are also divisions in functions such as remittances, stock trading, cryptocurrency trading, and payments. Blockchain and stablecoins can connect these islands, providing users with a highly integrated experience.
• Micropayments: In the current financial system, high transaction fees make small transactions difficult to achieve. Blockchain and stablecoin technology provide a solution for this. Imagine paying only for the minutes you actually watch on streaming platforms, or earning proportionally based on the amount of ads you view; a micropayment economy will thrive as a result.
• Lower fees: This may not please issuers and payment networks, but in an ideal stablecoin payment system, they are not necessary at all. Transaction fees can thus be reduced by 1% to 2%. For high-frequency trading firms, this means that profits will see a significant rebound, a considerable portion of which will be passed on to consumers in the form of new benefits.

####6. The essence of the problem: the game between net inflows and outflows.

The discussion around the Korean won stablecoin is ultimately a game of net inflows and net outflows. We are in an era where the financial backend systems are highly fragmented; banks, payment networks, and securities settlement systems are in a state of disconnection across different continents, different countries, and even within the same country.

Blockchain has the ability to integrate all of this into a unified system. Today, stablecoins and RWA have become hot topics in the United States, driven by people's push to replace the outdated financial system with blockchain. In the grand trend of financial technology development, blockchain has become an unstoppable force.

If the blockchain can integrate multiple financial systems, the result will be greater accessibility. South Korean users can pay for services in Nigeria with Korean Won, Vietnamese users can purchase Korean content with Vietnamese Dong, and Americans can spend Lotte points. On the basis of blockchain, anything is possible.

The improvement in accessibility is precisely the issue that governments and businesses around the world must consider: will the launch of a Korean won stablecoin bring more capital inflows to the country and the platform, or will it lead to more capital outflows? For the United States, the answer is obvious. The dominance of the dollar means more capital inflows, and thus the dollar stablecoin receives full support. But for South Korea, this trade-off is more complex. Businesses also need to consider whether opening products to the global market will be more beneficial than detrimental.

From this perspective, people can begin to assess whether the Korean won stablecoin business is helpful or harmful.

####7. Top-down adoption path

South Korea is a financial powerhouse. In countries with unstable currencies, there is a natural impetus for the public to adopt stablecoins from the bottom up. However, in South Korea, users have almost no reason to turn to the use of the Korean won stablecoin on their own.

If the government or enterprises truly want to introduce stablecoins, they must cleverly embed them into the backend systems. Users don't even need to be aware of the existence of stablecoins to enjoy the new features supported by them.

For example, overseas remittances may become more convenient. Cross-platform payments may achieve seamless integration. Platform points may be easier to redeem. Subscription models based on micro-payments may emerge. All of this can be achieved top-down through stablecoins and blockchain backend technology.

If exchanges replace the Korean won with a Korean won stablecoin, users will adopt it accordingly. If financial technology giants like Naver, Kakao, or Toss adopt the Korean won stablecoin option and introduce incentives, users will adopt it accordingly. If streaming platforms launch a micro-payment system based on the Korean won stablecoin, users will adopt it accordingly.

####How is the future of the Korean won stablecoin?

After months of dialogue with public institutions, financial institutions, and enterprises, I have never encountered any participant who has a clear sense of purpose or a concrete plan for the Korean won stablecoin. To be honest, this is because even if the won becomes more accessible through blockchain technology, its value positioning remains unclear.

However, I believe South Korea must move forward. In the United States, the government, the Securities and Exchange Commission, and the Commodity Futures Trading Commission are fully promoting the development of blockchain technology. The banking industry, payment systems, and securities infrastructure are gradually being replaced by blockchain technology, and this trend means that it is only a matter of time before the world transitions from outdated backend systems to blockchain.

The launch of the Korean won stablecoin is already late. However, if Korea waits until 2027 to launch it on a private chain as currently discussed, they will be far behind the global development pace. In this tough competition for stablecoins, the real question is whether Korea can still formulate a meaningful development direction.