The newly appointed Governor of the Bank of Korea (BOK) has delivered his first policy address in office, highlighting central bank digital currencies (CBDCs) and bank-issued deposit tokens while skipping any mention of stablecoins, despite South Korea’s efforts to develop a related framework and establish a local market.
New BOK Governor Pushes For CBDCs
In an inauguration speech on Tuesday, Bank of Korea’s new governor, Shin Hyun-song, began his term outlining the priorities the central bank will focus on over the next four years.
The BOK Governor, who is also a former head of the Monetary and Economic Department at the Bank for International Settlements (BIS), addressed the central bank’s role in a digitalized financial environment.
Shin affirmed that the BOK’s mission is to safeguard trust in money and the stability of payments and settlements, while preparing for digital financial innovation. He also shared that internationalizing the won is “an important task to establish a currency infrastructure befitting our economy’s status,” highlighting CBDCs and bank-issued deposit tokens as key pieces to boost the won.
Through Phase 2 of Project Han River, we will increase the usability of CBDC and deposit tokens, and through international cooperation such as the Agora Project, we will enhance the won’s standing even in a digital payments environment.
However, he noted that the efforts to internationalize the won and innovate South Korea’s currency regime should not undermine the country’s financial stability. Therefore, the BOK must implement safeguards and a “macroprudential framework suited to the changed environment,” which it will discuss and develop.
Despite his pro-innovation stance, the new BOK governor failed to mention stablecoins during his inaugural speech, potentially signaling that the tokens could take a secondary role under his tenure.
Shin had previously addressed the topic, asserting that won-denominated stablecoins would play a role in the currency ecosystem of the future and could co-exist with CBDCs and deposit tokens.
“I expect that central bank digital currencies and deposit tokens will be able to coexist with stablecoins in a manner that is supplementary and competitive to each other,” he said on April 14.
South Korea’s Stablecoin Legislation Stalls
It’s worth noting that stablecoins have been a crucial part of the country’s digital transformation and have dominated South Korea’s policy debates over the past year. Last year, lawmakers delayed the Second Phase of the Virtual Asset User Protection Act, known as the Digital Assets Act, due to a disagreement between the FSC and the BOK.
As reported by Bitcoinist, the highly anticipated legislation is expected to address the issuance and distribution of won-pegged tokens. However, the financial institutions couldn’t agree on the extent of banks’ role in the issuance of stablecoins, despite agreeing that financial institutions must be involved.
While the central bank pushed for a consortium of banks owning at least 51% of any stablecoin issuer seeking approval in the country, the FSC was concerned that giving banks a majority stake could reduce participation from tech firms and limit the market’s innovation.
Last week, South Korean lawmakers urged the government to prioritize stablecoin legislation. At a Korean Commercial Law Association conference in Seoul, Representative Kim Sang-hoon publicly asked the National Assembly to approve the Digital Asset Act.
The chairman of the Special Committee on Digital Assets and a key lawmaker from the ruling People Power Party (PPP) expressed concerns about the delay, warning that while politicians argue over governance structures, the market is moving without them.
“At a time when institutionalization is urgently needed, governance issues such as restrictions on major shareholders’ stakes have suddenly taken center stage in the discussion, while the essential discussions on market stability and support for innovation—which are the core of the bill—are being pushed to the sidelines,” he stated.
