Governor Rhee Warns of Forex Challenges Despite Policy Support
South Korea’s central bank is not opposing the development of a won-pegged stablecoin, but concerns about foreign exchange volatility remain a key challenge. Speaking at a recent press event, Bank of Korea Governor Rhee Chang-yong noted that while he isn’t against issuing a domestic stablecoin, such an asset might increase reliance on dollar-based tokens rather than reducing their influence.
“Issuing won-based stablecoin could make it easier to exchange them with dollar stablecoin rather than working to reduce use of dollar stablecoin,” Rhee said, according to a Reuters report.
Forex Reserves Falling: A Key Concern
The backdrop to Rhee’s caution is the decline in South Korea’s foreign exchange reserves, which dropped from $415.6 billion in December to $404.6 billion by the end of May—a reduction of $11 billion in just six months. This shrinking buffer adds weight to the central bank’s concerns about additional pressure from capital outflows tied to stablecoin conversions.
President Lee’s Push for Crypto Regulation
The comments come as President Lee Jae-myung’s administration pushes forward with crypto reforms. As part of campaign promises to modernize South Korea’s digital asset landscape, the ruling Democratic Party proposed the Digital Asset Basic Act on June 10.
The act allows for:
- Private companies with at least $368,000 in equity capital to issue stablecoins
- Mandatory reserves to back redemptions
- Regulatory approval by the Financial Services Commission (FSC)
These provisions aim to ensure investor protection and market stability, especially as young investors continue entering the crypto space.
Growing Appetite for Non-USD Stablecoins
Globally, the stablecoin market is still dominated by USD-backed tokens, such as Tether (USDT) with a $156 billion market cap, and Circle’s USDC at $61 billion, according to DefiLlama.
However, non-dollar stablecoins are gaining traction. Circle’s euro-pegged EURC recently saw a 156% surge in market cap to $203 million this year alone—demonstrating a growing demand for localized currency tokens.
Conclusion: Opportunity With Oversight
South Korea appears poised to explore won-based stablecoins, but the central bank urges caution to avoid unintended consequences in its forex management strategy. With the Digital Asset Basic Act moving forward, balanced regulation could open doors for innovation, while preserving financial stability amid growing global interest in non-USD stablecoins.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.