South Korea’s central bank chief warned that won-denominated stablecoins could complicate capital flow management. Bank of Korea Governor Lee Chang-yong mentioned at the Asian Financial Forum the potential impact of stablecoins on foreign exchange stability. The ongoing debate in South Korea revolves around who should be allowed to issue stablecoins and oversight regulations, stalling progress on the Digital Asset Basic Act.

Lawmakers are divided over stablecoin rules, leading to the postponement of the bill submission to the National Assembly in South Korea. Disagreements persist over stablecoin issuance rules, ownership caps for exchanges, and regulatory oversight. The central bank advocates for bank-led issuance of won-pegged stablecoins to mitigate systemic and foreign exchange risks, while industry groups push for broader authorization under regulatory supervision.

South Korean authorities are facing pressure on the Korean won amid trade tensions with the US and a weakening currency. The legislative deadlock has also delayed discussions on initiatives like allowing listed companies to trade crypto and introducing spot crypto exchange-traded funds (ETFs) in South Korea. The central bank’s cautionary remarks highlight the complexity of stablecoin regulations and their potential impact on capital flow management.

Read more at Cointelegraph: South Korea Central Bank Warns Stablecoins Could Complicate FX Controls