Bank-Led Won Stablecoin Model Could Constrain Innovation, Industry Executives Warn
Digital asset executives say South Korea’s preference for bank-led won stablecoins may weaken incentives to build new payment infrastructure as regulators weigh issuance rules, capital controls and cross-border uses.
South Korea’s proposed bank-led framework for won-backed stablecoins could limit competition and slow the development of new payment infrastructure, according to digital asset executives who discussed the issue at a roundtable in Seoul.
The debate comes as Korean regulators consider who should be permitted to issue tokens designed to maintain a stable value against the won. The Bank of Korea has favored a model centered on banks, pointing to their compliance systems and experience in managing financial risks. Industry representatives, however, argued that incumbent institutions may have less incentive than fintech companies to develop services that compete with existing payment networks.
Anthony Koo, head of payments at Singapore-based stablecoin issuer StraitsX, said large banks already process payments through established infrastructure and may therefore see limited value in building an alternative. John D’Agostino, head of strategy for Coinbase Institutional, said banks also have a reason to favor tokenized deposits, which could allow them to use blockchain networks while retaining deposits and customer relationships.
John Cho, chief stablecoin officer at the Kaia DLT Foundation and co-founder and chief executive of Ratio, suggested that a division of responsibilities could offer a compromise. Banks could provide custody and other regulated functions while technology companies develop consumer and business services. He emphasized that the structure under discussion has not been finalized.
The executives also raised broader financial-stability concerns. Ashley Moore, managing director at digital asset manager Hilbert Capital, said interest-bearing stablecoins could draw funds away from conventional bank deposits, potentially affecting banks’ funding base and lending capacity. That risk adds another layer to regulators’ consideration of market competition and consumer protection.
Cross-border use is another unresolved issue. Korea must determine how won-backed tokens would operate alongside capital controls and the won’s restricted convertibility. Participants said simply applying rules designed for traditional payment systems could reduce the efficiency gains associated with blockchain settlement. Others argued that stablecoins do not necessarily provide an automatic route around capital controls and could be incorporated into regulated payment channels.
The commercial case for won-backed tokens may depend on reducing settlement costs rather than replacing the dollar as a store of value. Executives pointed to potential uses in trade and payments between Korea and countries such as Vietnam. Cho cited proof-of-concept work with KB Group in which Korean travelers paid from won balances while Vietnamese merchants received local currency, with test stablecoins handling settlement behind the scenes.
Such systems could make blockchain technology largely invisible to consumers while expanding access to merchants outside card networks. The policy choice facing Korea is therefore not only which institutions may issue stablecoins, but also whether the final framework leaves enough room for new providers and payment models to emerge.