Stablecoins: Korea’s Bold (and Slightly Annoying) Move 😲

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Ah, the Bank of Korea. Always one for a bit of… supervision. It appears these esteemed gentlemen – and one presumes, ladies, though one rarely *sees* them amidst these weighty pronouncements – have decreed that those daring enough to issue won-based stablecoins must, henceforth, deposit their precious reserves directly with the central bank. A rather blunt instrument, one might say, but then, what is bureaucracy if not a succession of blunt instruments? This proposal, naturally, emerged not from a spontaneous burst of insight, but from documents dutifully submitted to the National Assembly’s finance committee on October 1st. The very idea.

The government, with all the haste one might expect, intends to unveil its first draft bill concerning these won-pegged entities in October. They whisper of protecting the users, a noble aim, certainly, and preventing private issuers from indulging in what they delicately term “seigniorage-like profits.” As if a little profit is a crime these days! 💸

Bank of Korea Pushes for Stricter Controls

According to the Herald Economy – a publication I’m sure is brimming with insights into the nuances of digital finance – the BOK ventured to suggest that “if deemed necessary by the central bank,” a rather ominous caveat, mandatory deposit requirements for reserve assets should be… considered. One shudders to think what might prompt such “necessity.” They fret, naturally, about sudden redemption surges and the aforementioned uncontrolled money supply growth. It’s all terribly frightful, you understand. 👻

Apparently, these issuers are currently engaging in the shocking practice of investing their reserves in *risk-free* assets, such as government bonds! The audacity! Redirecting these funds to the central bank, so the logic goes, will limit their earnings to the modest levels dictated by the policy rate. One imagines the issuers weeping quietly into their charts.

The BOK, ever eager to appear internationally relevant, cites the American Federal Reserve, which, it notes, pays policy-rate interest on deposits, but thankfully does *not* impose mandatory requirements. Though, of course, only entities approved by the Fed are permitted to issue stablecoins in that paragon of liberty. A small detail. 😏

Requiring these deposits, they believe – with the unwavering conviction of those who have never actually *used* a stablecoin – will somehow magically align them with the traditional payment system and ensure redemption. Building confidence, you see. Reducing systemic risks. All rather grand pronouncements, don’t you think?

Full Reserve Demands and October Bill

This measure, unsurprisingly, threatens to diminish the profitability of stablecoin issuance in Korea, potentially discouraging anyone other than banks from participating. But the BOK assures us, with an air of paternalistic concern, that this is a small price to pay for greater stability. Including protection against a “coin run,” a phrase that sounds alarmingly reminiscent of a particularly bad banking crisis.

They’ve also embraced the charmingly draconian idea of a full reserve model – 100% of liabilities parked in safe assets, much like those delightful prepaid payment instruments. A policy council will apparently be formed to decide what constitutes “safe,” and the government, naturally, will retain the power to refine these rules at whim.

On the matter of *who* should be allowed to issue these things, the BOK is surprisingly forthright: “Because of risks such as regulatory arbitrage and possible restructuring of the financial industry, initial issuance should come from consortia led by banks with strong compliance capacity, before expanding more broadly.” In other words, let’s keep it amongst ourselves, shall we? 🧐

The Financial Services Commission, ever eager to please, will release its official legislative draft in October. And so, Korea positions itself in the global scramble to regulate these digital curiosities. One can only hope they haven’t stifled innovation in the process. Or, at the very least, haven’t made it terribly inconvenient. 🤷

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2025-10-01 09:46