Will It Land in 2027? An In-Depth Analysis of the Capital Game Behind the "Difficult Birth" of the Korean Won Stablecoin

Translation: Tim, PANews

Key Points:

What is the current status of the development of the Korean won stablecoin? Let's analyze the positions and latest developments of the South Korean government, parliament, and business community.
The essence of stablecoins can be summarized as a game of "net inflows versus net outflows." Blockchain technology has expanded the inclusiveness of financial services, but for governments and businesses, the core issue is whether this enhanced inclusiveness will attract more capital inflows or lead to more capital outflows; all policies and strategies must be formulated based on this projection.
Within this framework of "net inflows versus net outflows," the Korean won stablecoin presents a tricky problem for policymakers and businesses. However, the global financial system has begun to tilt towards blockchain. If South Korea hesitates, it risks being left far behind in the wave of financial innovation.

1. Lengthy Legislative Process

Currently, South Korea has proposed five independent bills related to the Korean won stablecoin. Members of the ruling Democratic Party, including Min Byung-deok, Ahn Doo-chul, Kim Hyun-jung, and Lee Gang-il, have submitted proposals. A member of the opposition People Power Party, Kim Eun-hye, has also proposed a bill. Although the general framework of the five drafts is similar, there are differences in details such as the qualifications of issuers, whether interest payments are allowed, and collateral requirements.

In addition to the legislators' bills, the Financial Services Commission (FSC) of South Korea is also preparing to launch the second phase of digital asset regulations, which will include stablecoin regulatory provisions. As the FSC will ultimately have the highest regulatory authority over stablecoins pegged to the Korean won, the industry is closely watching the upcoming regulatory draft.

Unlike in the United States, in South Korea, if the legal framework for financial products has not been established, companies can hardly conduct any business in practice. Therefore, the most critical issue for businesses is when the legislation for the Korean won stablecoin can actually be passed.

According to the legislative activity report of the 21st National Assembly of Korea, the average time for government proposals to pass is 435.2 days, while the average processing time for member proposals is 657.1 days. The stablecoin bill that the Financial Services Commission plans to submit in October 2025 falls under the category of government proposals. Even starting from this point, the actual implementation of the Korean won stablecoin legislation is likely to wait until early 2027. This means that before then, South Korean companies and even foreign blockchain projects will find it nearly impossible to advance specific business plans.

2. Favorable for Private Blockchains

From the beginning, we have argued that for South Korea's blockchain industry to truly develop, it must issue the Korean won stablecoin on public chains like Ethereum or Solana. However, at present, this vision seems difficult to achieve.

The two public institutions expected to be responsible for regulating the Korean won stablecoin are the Financial Services Commission and the Bank of Korea. The central bank's position is clear: a Korean won stablecoin needs to be launched, but there is no reason to rush. They prefer to start with private blockchains and gradually expand. The newly appointed chairman of the Financial Services Commission even stated that South Korea should build its own customized blockchain and issue stablecoins based on that.

Their position is not without reason. Unlike dollar stablecoins, the Korean won stablecoin faces high entry barriers due to foreign exchange regulations and the risk of capital outflow. From the perspective of national economic management, directly issuing the Korean won stablecoin on a public chain is indeed difficult to control.

South Korea is one of the few countries in the world that does not rely on Visa and Mastercard for domestic payments, preferring to use its own payment systems. The country is still deeply affected by the trauma of the 1997 foreign exchange crisis. Therefore, regulators prefer to keep the economy within predictable limits. It seems likely that the Korean won stablecoin will be launched on private chains rather than public chains.

For those supporting the development of South Korea's blockchain ecosystem, this direction is disappointing. Nevertheless, domestic system integrators and global blockchain foundations can still find opportunities.

Local system integration companies in South Korea are expected to undertake the construction projects of Korean-style blockchains tailored for stablecoin issuance. A notable example is LG CNS, the IT service subsidiary of LG Group, which built the blockchain infrastructure for the Bank of Korea's central bank digital currency pilot.

Public chain projects can still provide technical support for private networks handling the issuance and distribution of the Korean won stablecoin. Avalanche subnets and Arbitrum Orbit are typical examples. Any team with experience in building and operating large public chains should be able to easily customize such solutions for South Korea.

The utility of stablecoins primarily comes from their existence on public networks. To make the Korean won stablecoin competitive, it must either be built on a public chain from the start or, due to political factors, be unable to do so, but ultimately it must expand to a public chain.

If issuance is limited to private networks, the only possibility for the success of a Korean-style blockchain is: a state-operated private network must be established, and all financial services, including stablecoins, tokenized assets, and platform points, must connect to that network.

From a technical perspective, such a model would maintain privacy, but for South Korean citizens and the domestic market, it could simulate the user experience of a public chain. Through a single wallet and a Korean won stablecoin, users could integrate remittances, payments, stock trading, and cryptocurrency trading on one platform. This seems to be the only way to simultaneously meet the needs of the government, the blockchain industry, and users.

Will the Korean won stablecoin be allowed to be issued on a public chain? We can only wait and see. But the worst-case scenario is clear: multiple private networks will emerge in South Korea, thereby fragmenting the financial system.

3. Companies in Wait-and-See Mode

South Korean media reports almost daily headline news about a company applying for a Korean won stablecoin trademark or another company considering launching stablecoin services. However, from an external perspective, the reality seems quite different. In South Korea, companies' attitudes towards the Korean won stablecoin are divided into two camps.

The first camp is the proactive faction. Generally speaking, the smaller the company, the more positive its attitude towards engaging in Korean won stablecoin business. There are multiple reasons behind this: compared to large conglomerates, small businesses face less regulatory risk, and given the popularity of the topic, involvement in stablecoins can also generate significant public relations effects.

But the problem is that stablecoins are a scale-economy business. On the issuance side, success requires expanding supply to establish high liquidity and network effects. On the circulation side, it requires attracting a large number of users and merchants to create actual utility. Small businesses can enter the market, but they will encounter bottlenecks in scalability. Their best opportunities do not lie in the core issuance or circulation aspects of the value chain, but in the surrounding service areas.

The second camp is the cautious faction. The larger the company, the more likely it is to adopt a wait-and-see approach and take an extremely cautious stance. This cautious attitude mainly stems from two reasons: first, legal uncertainty. As mentioned earlier, the legislative process for the regulatory framework of the Korean won stablecoin is expected to take one and a half to three years. In the South Korean market environment, it is nearly impossible for large companies to proactively launch stablecoin services before the regulatory framework is established.

The second reason is commercial viability. Unlike dollar stablecoins that serve a large global market, the Korean won stablecoin essentially belongs to the domestic market. For large companies that have successfully conducted domestic financial business, the actual benefits of shifting to blockchain and stablecoins may not be sufficient to constitute enough attraction.

4. Small Scale of South Korea's Short-Term Bond Market: Is Issuance of Collateralized Stablecoins Possible?

Tether is the issuer of USDT, holding $130 billion in U.S. short-term Treasury bills and repurchase agreements. Circle is the issuer of USDC, holding $63 billion in money market funds. In contrast, South Korea does not issue government bonds with maturities of less than one year. The government occasionally issues treasury financing bills to meet temporary funding needs, but their total scale is only about $7 billion.

This means that the scale of the short-term bond market that can serve as collateral for the Korean won stablecoin is too small, constituting a fundamental barrier to issuance. Recently, the Korea Capital Market Institute proposed the idea of issuing short-term government bonds specifically for stablecoin issuance, but the Bank of Korea immediately refuted this idea, warning against it and suggesting that monetary stability bonds could be used as an alternative.

These bonds, issued by the central bank to absorb market liquidity, typically have maturities of less than three years, with some even as short as three months, and their overall scale is relatively substantial, possessing the potential to become an alternative. However, even so, the scale of this market remains small.

In addition to scale, whether government bonds or stability bonds, there is another issue of insufficient attractiveness as collateral: yield. The average yield on U.S. short-term bonds is around 4%, while the yields on South Korean government bonds and stability bonds are only slightly above 2%. For issuers, this lower yield significantly weakens the motivation to operate Korean won stablecoin businesses, especially since their issuance scale is far smaller than that of dollar stablecoins.

5. Other Misunderstandings About the Korean Won Stablecoin

There are also some misunderstandings in the South Korean market regarding the Korean won stablecoin that need to be corrected.

First, the risks of issuing stablecoins on public networks are exaggerated. Even if the Korean won stablecoin is issued on a public chain, the rules defined by regulators and issuers can still be directly executed through smart contracts. For example, transactions can be restricted to Korean users who have completed real-name authentication. Securitize has already proven the feasibility of this model through tokenized securities like BUIDL, which fully meet regulatory requirements through smart contract logic. This means that the Korean won stablecoin can circulate on public networks while allowing regulators to monitor the flow of funds comprehensively and prevent unforeseen situations.

The second misunderstanding is that, as a highly developed financial market, the adoption of the Korean won stablecoin would have minimal impact on user experience. This view is only half correct. Indeed, South Korea's fintech infrastructure is very advanced, and users can easily access various financial services through multiple platforms. From this perspective, blockchain-based stablecoins may not bring a significant leap in convenience, but they will offer several important advantages:

Cross-platform interoperability: Nowadays, financial services are not only fragmented across platforms like Naver, Kakao, Toss, and Upbit, but there are also divisions in functions such as remittances, stock trading, cryptocurrency trading, and payments. Blockchain and stablecoins can connect these islands, providing users with a highly integrated experience.
Micropayments: In the current financial system, high transaction fees make small transactions difficult to achieve. Blockchain and stablecoin technology provide solutions for this. Imagine paying only for the minutes you actually watch on a streaming platform or receiving proportional earnings based on the number of ads you view; a micropayment economy would thrive as a result.
Reduced costs: This may not please issuers and payment networks, but in an ideal stablecoin payment system, they would not be necessary at all. Each transaction fee could be reduced by 1% to 2%. For high-frequency trading companies, this means a significant rebound in profits, a substantial portion of which would be passed on to consumers in the form of new benefits.

6. The Essence of the Problem: The Game of Net Inflows and Outflows

The discussion surrounding the Korean won stablecoin is ultimately a game about net inflows versus net outflows. We are in an era where the financial backend systems are highly fragmented, with banking systems, payment networks, and securities settlement systems in different continents, countries, and even within the same country being mutually disconnected.

Blockchain has the capability to integrate all of this into a unified system. Today, stablecoins and RWA have become hot topics in the U.S. because people are pushing to replace outdated financial systems with blockchain. In the grand tide of financial technology development, blockchain has become an unstoppable trend.

If blockchain can integrate multiple financial systems, the result will be greater accessibility. South Korean users could pay for services in Nigeria with won, Vietnamese users could purchase Korean content with dong, and Americans could consume Lotte points. On the foundation of blockchain, anything is possible.

This enhancement of accessibility is precisely the issue that governments and businesses must consider: will the launch of the Korean won stablecoin bring more capital inflows to the country and platforms, or will it lead to more capital outflows? For the United States, the answer is clear. The dominance of the dollar means more capital inflows, thus dollar stablecoins receive full support. But for South Korea, this trade-off is more complex. Businesses also need to think about whether opening products to the global market will be more beneficial than detrimental.

From this perspective, one can begin to assess whether the Korean won stablecoin business will be helpful or harmful.

7. Top-Down Adoption Path

South Korea is a financial powerhouse. In countries with unstable currencies, there is a natural motivation for the public to adopt stablecoins from the bottom up. However, in South Korea, users have little reason to independently turn to the Korean won stablecoin.

If the government or businesses truly want to introduce stablecoins, they must cleverly embed them into backend systems. Users need not even be aware of the existence of stablecoins to enjoy the new functionalities they support.

For example, overseas remittances could become more convenient. Cross-platform payments could achieve seamless integration. Platform points could be easier to redeem. Subscription models based on micropayments could emerge. All of this can be achieved top-down through stablecoins and blockchain backend technology.

If exchanges replace the won with the Korean won stablecoin, users will follow suit. If fintech giants like Naver, Kakao, or Toss adopt the Korean won stablecoin option and introduce incentives, users will follow suit. If streaming platforms launch micropayment systems based on the Korean won stablecoin, users will follow suit.

8. What Does the Future Hold for the Korean Won Stablecoin?

After months of dialogue with public institutions, financial institutions, and businesses, I have yet to encounter any participant with a clear sense of purpose or a concrete plan regarding the Korean won stablecoin. Frankly, this is because even if the won becomes more accessible through blockchain technology, its value positioning remains unclear.

However, I believe South Korea must move forward. In the United States, the government, the Securities and Exchange Commission, and the Commodity Futures Trading Commission are all actively promoting the development of blockchain technology. The banking industry, payment systems, and securities infrastructure are gradually being replaced by blockchain technology, and this trend indicates that the global transition from outdated backend systems to blockchain is merely a matter of time.

The launch of the Korean won stablecoin is already overdue. But if, as current discussions suggest, South Korea waits until 2027 to launch it on private chains, they will fall far behind the global development pace. In this challenging competition for stablecoins, the real question is whether South Korea can still formulate a meaningful development direction.

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Will it only be implemented in 2027? A deep analysis of the capital game behind the "difficult birth" of the Korean won stablecoin.