Lee Jae-myung, leader of South Korea's Democratic Party, has unveiled a proposal to create a stablecoin pegged to the Korean won (KRW), aiming to curb capital flight and strengthen national financial sovereignty.
The Stablecoin Initiative
According to The Korea Herald, Lee emphasized during recent policy discussions that a KRW-backed stablecoin would enable South Korea to:
- Retain domestic wealth within the country
- Reduce reliance on foreign-issued digital assets like Tether (USDT) and USD Coin (USDC)
- Counteract the $408 million in asset outflows recorded in Q1 2024 (nearly half linked to foreign stablecoins)
Current Legal Landscape:
South Korean law prohibits domestic stablecoin issuance, forcing local exchanges to depend on dollar-based alternatives.
"We must establish a won-backed stablecoin market to prevent national wealth from flowing overseas," stated Lee Jae-myung.
Pro-Crypto Campaign Promises
The stablecoin proposal forms part of Lee's broader digital asset strategy, which includes:
- Legalizing spot cryptocurrency ETFs
- Allowing institutional investors (e.g., national pension funds) to participate in crypto investments after meeting stability criteria
- Creating integrated monitoring systems and reducing transaction fees under government oversight
Both Lee and his conservative opponent, Kim Moon-soo, have pledged support for spot crypto ETFs.
Economic Concerns
The proposal has drawn warnings from economists like Shin Bok-cheong, senior researcher at the Korea Capital Market Institute:
- Stablecoins could inflate money supply
- Private issuers may gain disproportionate monetary control
- "Stablecoins represent another form of banking—creating money out of thin air," Shin cautioned.
Democratic Party Establishes Digital Asset Committee
On May 13, 2024, the Democratic Party launched a Digital Asset Committee to:
👉 Explore crypto policy frameworks
👉 Address regulatory uncertainties
Key Focus Areas:
| Priority | Action Item |
|---|---|
| Stablecoin Regulation | Develop reserve requirements (minimum ₩500B) |
| Legal Infrastructure | Draft Digital Asset Basic Act for FSC approval |
| Industry Growth | Facilitate public-private partnerships |
This committee joins existing Korean crypto working groups, including:
- Virtual Asset Committee (2024)
- FSC-led Crypto Task Force (2022)
FAQs
Q: How would a KRW stablecoin differ from existing options?
A: It would be directly redeemable for Korean won, eliminating dependence on USD-backed alternatives.
Q: What safeguards are proposed?
A: Issuers must maintain substantial reserves (₩500B+) and obtain FSC approval under the new law.
Q: Could this affect monetary policy?
A: Yes—economists warn stablecoins might complicate Korea's money supply management.
Q: When might the stablecoin launch?
A: No timeline exists yet; the proposal requires legislative approval and FSC review.