Bank of Korea Governor Warns Against Won-Pegged Stablecoin Risks

Lee Chang-yong, the governor of the Bank of Korea, has recently cautioned against the establishment of stablecoins pegged to the Korean won, citing significant concerns about financial stability. His warnings highlight growing tensions between technological innovation and traditional monetary policy frameworks, particularly as digital asset adoption accelerates across global markets.

Capital Control Concerns Surrounding Pegged Stablecoins

The central banker emphasized that won-pegged stablecoins could facilitate the circumvention of capital flow restrictions, a critical vulnerability that concerns Korean policymakers. While stablecoins pegged to the U.S. dollar have gained substantial adoption due to their lower transaction fees and operational efficiency, the introduction of locally-pegged alternatives presents distinct regulatory challenges. Lee noted that exchange rate volatility poses additional risks, potentially triggering market speculation that destabilizes the broader financial ecosystem.

Regulatory Challenges from Non-Traditional Issuers

A key concern articulated by the Bank of Korea leader centers on the proliferation of stablecoin issuance by entities operating outside conventional banking infrastructure. Unlike regulated financial institutions, these non-traditional issuers operate with minimal oversight, creating blind spots in the regulatory framework. The governor stressed that the rapid expansion of pegged stablecoins issued by decentralized platforms and private companies exacerbates compliance gaps, making it increasingly difficult for central authorities to maintain control over monetary policy and capital flows.

The Bank of Korea’s stance reflects broader global apprehensions about the role of stablecoins in financial markets, particularly when such instruments circumvent established regulatory safeguards.