Bank of Korea (BOK) has said it wants a role in authorizing Won stablecoin issuers, given stablecoin legislation is a work in progress. Separately, Tether will now issue Tether dollar stablecoins on the Kaia public blockchain, which was formed by merging Korea’s Klaytn with Japan’s Finschia blockchain.
Bank of Korea wants influence over stablecoins
Last week Koh Kyung-chul, the Head of the BOK’s Electronic Finance team, highlighted the central bank’s desire to play a role in stablecoin regulation. He said, “Stablecoins have a significant impact on the central bank’s policy execution, including monetary policy, financial stability, and payment systems,” and emphasized, “There is a need to grant the central bank substantial legal authority at the authorization stage regarding issuer entry regulations,” according to a report from BloomingBit.
Koh was speaking during a Korean Financial Law Association conference last week. He continued, “By substantially intervening at the authorization stage, the central bank should minimize the negative impact on its policy execution.”
Another high ranking BOK official made similar comments today, according to BusinessKorea. “If Won-based stablecoins are used like legal tender, they could complicate monetary policy operations, necessitating BOK’s involvement in the authorization process.” The official continued, “In fact, in the United States, the Federal Reserve System (Fed) also exercises some authority in related legislation.”
The point regarding the Federal Reserve is a controversial one, as Republican legislators have sought to give other banking regulators such as the OCC and state bodies more of a say, and restrict the Federal Reserve’s role. Last week the GENIUS Act stablecoin legislation failed its first vote.
BusinessKorea also quoted BOK Governor Rhee Chang-yong discussing stablecoins during a press conference last week. “Urgent regulation is needed for USDT (Tether) and others,” he said. “For Won-based stablecoins, we need to review whether to allow them or not from the beginning.”
Tether launches on Korean blockchain
The Governor’s comments came a couple of days before the formal announcement that the Kaia Foundation has partnered with the largest stablecoin issuer Tether, which will natively issue its digital currency on the Kaia blockchain.
Kaia resulted from the merger of Korea’s Klaytn public blockchain and Japan’s Finschia chain. The separate blockchains were each founded by large social networks, Kakao in Klaytn’s case and LINE founded Finschia. Hence, Kaia brings a potential audience of almost 250 million users, if one counts the social network audiences.
Meanwhile, Korea does not currently have stablecoin legislation, meaning Won stablecoins are not yet allowed. However, it is expected to pass laws later this year. Last month a consortium of Korea’s largest banks announced plans to issue a Won stablecoin.
