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Bank of Korea may issue deposit tokens on public blockchains to coexist with private stablecoins.
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Concerns raised about monetary sovereignty and financial stability due to rising stablecoin use.
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Nearly $20 billion in stablecoins left South Korea in Q1 2025.
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Experts stress sound fiscal policy over technical design for protecting sovereignty.
Bank of Korea’s Digital Currency Vision
The Bank of Korea is exploring how deposit tokens, issued by the central bank, could function alongside private-sector stablecoins on public blockchains. Deputy Governor Lee Jong-ryeol shared these plans during the 8th Blockchain Leaders Club event in Seoul. He emphasized that this initiative is part of the bank’s responsibility to safeguard the country's financial system.
The proposed tokens would be state-backed stablecoins operating within a broader digital currency framework. The aim is to allow both public and private digital currencies to coexist, offering more regulated alternatives to globally used stablecoins like USDT and USDC.
A National Concern Over Capital Flight
South Korea saw $40.6 billion in digital asset outflows during Q1 2025, with $19.5 billion of that in stablecoins. The Bank of Korea sees this trend as a major challenge to its monetary control. The concern isn’t just technical but structural, with critics warning that simply issuing government tokens isn’t enough to preserve sovereignty.
Peter Chung from Presto Labs noted that policy strength, not token mechanics, is key. Without strong fiscal and monetary frameworks, stablecoins will continue to cross borders freely, undermining national monetary systems.
Political and Regulatory Momentum Builds
The political climate is shifting too. Presidential candidate Lee Jae-myung has proposed a won-backed stablecoin to limit capital flight and reduce reliance on dollar-based digital assets. This push aligns with broader government efforts to modernize crypto regulations and prepare for future financial challenges.
Cross-Border Projects and Growing Global Risk
South Korea is also participating in the Agora Project, a settlement system involving central banks from seven nations. The system is designed to limit cross-border use of deposit tokens, further highlighting the tension between innovation and sovereignty.
