Sluggish legislation hinders Korea's entry into stablecoin market

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Sluggish legislation hinders Korea's entry into stablecoin market

Published: 18 Jul. 2025, 16:37 Updated: 18 Jul. 2025, 18:07

Audio report: written by reporters, read by AI

A digital board at the Bithumb Lounge in Seocho District, southern Seoul, displays Bitcoin’s record-high price on July 14. [NEWS1]

While the United States and Europe charge full speed into the stablecoin era, Korea is caught flat-footed — with lawmakers stalled, regulators silent and corporate giants circling a trillion-won prize they’re not yet allowed to touch. The window to shape the future of digital money is slamming shut, and Korea is running out of time.

The U.S. House passed the GENIUS Act on July 17, the first major federal regulatory framework for U.S. dollar–pegged stablecoins.

With bitcoin smashing past $123,000 and the U.S. Congress holding “Crypto Week” to fast-track crypto legislation, Korea faces a pivotal moment. Financial giants and tech firms from Korea's Yeouido in western Seoul to Pangyo in Gyeonggi, are jostling quietly behind the scenes, eyeing a piece of the emerging digital payments market, but stalled legislation has left the country in a dangerous holding pattern.

In Washington, President Donald Trump is calling for the full-scale legalization of stablecoins. The European Union’s sweeping Markets in Crypto-Assets (MiCA) framework went live in June. Meanwhile, in Korea, the talk is big — but the rules remain unwritten.

Will Korea truly enter the stablecoin era? If so, who will seize the upper hand in this emerging market?

With no legislation yet in place, what is driving companies into the race? And what strategies are shaping the first phase of this competition?

K-Stablecoin: Real push or just a fad?

Stablecoins, designed to maintain a steady value by pegging to fiat currencies, offer a tantalizing promise: peer-to-peer transactions without the friction of traditional banking — no costly remittance fees, no slow settlement times.

“Bitcoin was the proof-of-concept for blockchain, and stablecoins are the first product making real-world use possible,” said Seo Byung-yoon, head of DSRV Lab's Future Finance Research Institute.

The corporate response has been swift but cautious. Major Korean banks like KakaoBank, KB Kookmin and Woori have filed trademarks for stablecoin brands such as Kkbkrw, Kbpaykrw and Ckrw. Card issuers, securities firms, fintech players and even gaming companies like Wemade are staking early claims.

But ask them for details, and the message is the same: Watch and wait.

“We’re just monitoring the market under regulatory uncertainty,” said one card issuer representative. Kakao Pay has acknowledged forming an internal task force but stopped short of revealing specifics.

A Bitcoin sign is displayed on the wall of developers Ciprs and Rilea Group, who have sold a condominium unit in the Rider Residences, an under-construction project in Midtown Miami, using Bitcoin in a direct wallet-to-wallet transaction on July 16 in Miami, Florida. [AFP/YONHAP]

Legal vacuum stalls momentum

The holdup is legislative. While lawmakers like Min Byoung-dug and Ahn Do-geol of the Democratic Party have proposed bills to regulate stablecoin issuance and protect consumers, progress has been glacial. The Financial Services Commission (FSC), Korea’s top financial regulator, is working on phase-two digital asset rules but faces organizational limbo under the current administration.

“No one knows who will define the legal framework or when it will happen,” an industry insider said. “If a private company speaks too loudly, it could easily become a target.”

The United States and Europe set the pace

The contrast abroad is stark. In the United States, the proposed Genius Act aims to integrate stablecoins into the banking system. It restricts issuers to institutions such as FDIC-insured bank subsidiaries, those licensed by state regulators or nonbanks approved by the Office of the Comptroller of the Currency. It mandates full reserve backing and monthly disclosures of reserves, bans reinvestment or lending of reserves and requires all issuers to comply with anti-money laundering regulations under the Bank Secrecy Act.

An advertisement for the cryptocurrency Bitcoin is displayed on a building in Hong Kong on Nov. 18, 2021. [AP/YONHAP]

The EU's Markets in MiCA regulation, which took effect on June 30, mandates that stablecoin issuers must register with the European Banking Authority or national regulators.

Even non-EU firms must establish local branches. Issuers must hold 100 percent reserves in liquid assets like cash, bank deposits or government bonds within the EU.

The regulation also limits the use of foreign currency-backed tokens in favor of euro-based ones to protect monetary sovereignty.

Speed matters more

The most frequently mentioned legislative proposal in Korea is the “Digital Asset Basic Act” led by lawmaker Min.

It requires stablecoin issuers to be locally incorporated and hold at least 500 million won ($360,000) in capital.

The FSC’s upcoming legislation is expected to be broader, imposing reserve requirements and ensuring user redemption rights in line with global norms.

Corporate giants line up

In Korea, some firms are moving despite the uncertainty.

Naver Financial, the force behind Naver Pay, has signaled its readiness to enter the space, leveraging its 30 million users and 3.7 million merchants. In July, it teamed up with Dunamu, operator of crypto exchange Upbit, to form a stablecoin alliance.

Their partnership mirrors the U.S. model, where PayPal’s Pyusd stablecoin integrates directly into its payment system. Within a year, Pyusd hit a $1 billion market cap, growing at triple the pace of USDT and double that of USDC.

Park Sang-jin, CEO of Naver Financial, which runs Naver Pay, said on June 26 that the platform “has a robust infrastructure to handle massive online and offline transactions and a proven risk management system.”

"It is well-positioned to explore stablecoin applications," he said.

“Liquidity defines financial product differentiation,” said Oh Young-taek, an investment manager at Altos Ventures. “For stablecoins, the ability to secure demand points is critical.”

Naver Pay [NAVER]

Hashed, Korea’s largest blockchain investment firm, is in talks with major financial holding companies to issue a won-tied stablecoin.

Their model reportedly involves establishing a tech company backed by bank equity, similar to how internet-only banks operate.

Kim Yong-beom, now a chief of staff for policy at the presidential office and formerly head of Hashed Open Research, published a report in May suggesting banks should play a central role in stablecoin issuance.

Many agree that trust and stability, rooted in regulated financial institutions, are essential.

“Banks already conduct systematic risk management based on supervisory standards, classifying deposits into high, medium and low risk, and applying short- and long-term asset strategies,” said Cho Jin-seok, CEO of Coda. “If the law clearly defines the composition and management rules for cash-equivalent assets used as reserves for stablecoins, banks have both the capacity and experience to comply."

A model worth watching is JPMorgan’s recently launched deposit token, JPMD.

Tied 1:1 to bank deposits, it allows institutional clients to move funds quickly and securely.

It maintains FDIC coverage while improving transaction speed and transparency.

JPMD is being hailed as a successful bridge between traditional banking and blockchain.

Stablecoins beyond finance

Stablecoins could also transform other sectors.

In gaming, companies see them as a replacement for volatile in-game tokens.

Nexus plans to implement stablecoins into its “cross” platform. Wemade has introduced a dollar-tied stablecoin into its mainnet for game-related transactions.

Stablecoins also simplify cross-border payments. Unlike traditional card systems where funds move days after the transaction, blockchain enables instant settlement.

Travel Wallet CEO Kim Hyung-woo said that "70 to 80 percent of current manual operations in overseas payments could be automated" with stablecoins.

Entertainment companies are eyeing micro-payments.

“Consider overseas fans who want to buy merchandise but don’t own a Visa or Mastercard,” said Oh of Altos Ventures. “Stablecoins can solve that accessibility problem.”

Tech firms with blockchain expertise are also seeing value beyond issuance.

Open Asset recently completed a proof of concept for offline payments using a won-tied stablecoin and is now aiming to build a compliant infrastructure.

DSRV is positioning itself as a tech provider for companies seeking to integrate stablecoins into their business.

Is Korea too late?

Experts warn Korea has little time.

“If we keep standing by without any response, dollar-tied stablecoins could dominate Korea’s payment and remittance markets,” said Cho Jin-seok, CEO of Coda. “We could end up like parts of Latin America or Southeast Asia, where the dollar-tied stablecoin functions as de facto legal tender.”

Paypal signage is seen at the company's headquarters campus in San Jose, California on Jan. 8. [EPA/YONHAP]

Issuers of dollar-tied stablecoins like USDT and USDC invest most of the dollars they receive into short-term U.S. government bonds and other safe assets.

As their circulation grows, so does direct demand for U.S. Treasurys, ultimately reinforcing the dominance of the dollar.

This dynamic has sparked warnings that Korea must act quickly to develop and circulate its own won-tied stablecoin before dollar-backed alternatives take over the domestic financial system.

Kim Seok-hwan, vice president of Wemade, also believes that Korea has little time left.

“The government and regulators can no longer afford to delay. One way or another, legislation will move forward,” Kim said.

Some experts say that dollar-tied stablecoins will inevitably enter the Korean market, but not without limits.

Small businesses, in particular, still need to convert incoming stablecoin revenue into legal tender to cover other expenses, which underscores the need for a won-tied stablecoin.

Experts argue that if Korea plans to adopt stablecoins, whether pegged to the won or the dollar, it should build the won infrastructure from the outset.

“If we are going to adopt stablecoins, we must build the won infrastructure first,” said Ryu Chang-bo, president of the Open Blockchain & DID Association. “This may be the last chance for Korea’s blockchain industry. We must foster a national tech leader.”

But the launch of a won-tied stablecoin does not guarantee success.

One fintech adviser at a major law firm said a Korean stablecoin "cannot compete with dollar-tied tokens as a global reserve asset."

“If it’s just about functioning as a reference currency for crypto, a won-tied stablecoin stands no chance against the dollar,” the adviser said. “Its utility will be limited to domestic payments, and we must be clear about that.”

DSRV Lab's Seo warned that a won-tied stablecoin would fail if it only runs on a Korean blockchain.

“If the token is issued solely on a domestic mainnet, it is guaranteed to fail 100 percent,” Seo said. “We need to ensure interoperability with global standards from day one and expand its use overseas.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY JEONG YONG-HWAN, KIM MIN-JEONG [[email protected]]