South Korean banks unite to launch a won-pegged stablecoin, while the central bank urges caution amid growing digital currency interest.
A bold move toward digital dominance is being made by South Korea’s banking titans, who have partnered to introduce a stablecoin backed by the won.
As recent reports indicate, eight central South Korean banks are currently engaged in a stablecoin project in collaboration with the Open Blockchain and DID Association, the Financial Settlement Institute, and the Financial Settlement Institute.
South Korean Bank Consortium To Introduce Won-Linked Stablecoin
According to local reports, eight South Korean banks giants have collaborated to establish a won-pegged stablecoin as stablecoins continue to acquire momentum in the global crypto industry.
This initiative introduces the banking industry to digital assets through a consortium, to introduceintending to introduce trust-based and deposit-linked models.
“A stablecoin backed by the Korean won has the potential to serve as a viable alternative to conventional payment methods, such as currency exchange or bank wiring,” stated Sam Seo, Chairman of the Kaia DLT Foundation.
It is important to note that the action was taken just weeks after South Korea decided to implement a crypto regulatory revision under the newly elected President, Lee Jae-Myung.
Earlier this month, CoinGape reported that the Democratic Party proposed the Digital Asset Basic Act to legalize stable tokens.
Notably, the most recent initiative is designed to challenge the dominance of dollar-based currencies in the global financial market and preserve its position as a leader in the digital asset sector.
A spokesperson for the bank expressed their opinion on the initiative, stating,
There is a shared sense of crisis that if things continue this way, foreign dollar coins could dominate the domestic market. We need to secure both independence and competitiveness of the domestic financial system through a won-based digital currency.
Central Bank Is Urging For Cautious Approach
It is important to note that South Korean banks’ recent move comes despite the central bank’s cautious stance on stable tokens.
It has been reported that South Korean banks are advocating for the gradual introduction of won-pegged assets.
Intriguingly, South Korea’s entry into the stablecoin market is a component of its overarching endeavors to fortify its position in the global crypto market, fueled by various regulatory actions and initiatives.
For example, the nation amended its anti-money laundering regulations to mitigate the proliferation of cryptocurrency crimes in South Korea.
Senior Deputy Governor Ryoo Sang-dai suggests that the gradual introduction of won-pegged tokens should commence with commercial institutions subject to strict regulation.
He stated, “It is advisable to initially permit banks, which are subject to stringent regulations, to issue stablecoins using won, and subsequently expand to the non-bank sector as the experience accumulates.”
South Korean banks’ primary objective is to guarantee that introducing stable tokens does not disrupt financial stability or monetary policy.
A comprehensive evaluation of the designs and hazards is a component of the Bank of Korea’s proposal.
Its objective is to establish a strong framework that can address potential threats to financial stability by incorporating historical teachings.
This cautious approach is consistent with the global trend of central banks meticulously investigating the potential of stablecoins.
