South Korea has one of the world’s most active cryptocurrency markets. President Lee Jae-myung’s pro-won based digital assets position fuelling continued Korean stock market rally. An estimated 20% of the nation’s population has dabbled in digital asset trading. Consequently, banks, brokerages, and fintech companies have become increasingly interested in issuing stablecoins.

A parliamentary bill is driving this optimism. The draft legislation suggests that only companies with a minimum of Won500 million equity capital would be eligible to issue won-backed stablecoins. This step has markedly pumped up the retail sector, pushing stellar margin loans to a record Won20.5 trillion (~$15 billion).

President Lee's appointment of Kim Yong-beom, a known advocate for digital tokens, as chief policy advisor signals a potentially more favorable regulatory environment for cryptocurrencies. In Q1, the total trading volume of USD-pegged stablecoins in South Korea reached ₩57 trillion. This huge increase in usage has caused the Bank of Korea to accelerate its own plans for a central bank digital currency (CBDC).

The South Korean government has yet to publicly release what its licensing requirements will be for stablecoin issuers. This lack of clarity injects uncertainty in the market.

"We are keen to do the business, but we are watching out for where the government draws the line in terms of regulation" - a fintech industry executive.

Regulatory uncertainty still exists, but the sentiment is positive. Indeed, all the major industry players are looking to get a piece of the action in the rapidly expanding stablecoin realm. The promise of won-based stablecoins is compelling. Just like CBDCs can do in any other economy, they can make transactions faster, easier, and cheaper within the South Korean economy.