South Korea's central bank places its stablecoin ambitions on confidence rather than technology

South Korea’s central bank has taken a firm stance against privately issued stablecoins, emphasizing that the foundation of currency stability lies in public trust rather than technological innovation. In

published on Monday, the Bank of Korea (BOK) cautioned that stablecoins tied to the won are vulnerable to losing their peg and lack the institutional backing required to preserve their value, recommending that established banks should be at the forefront of any stablecoin projects. This approach diverges from international developments, as countries such as Kyrgyzstan and Hong Kong are actively piloting stablecoin systems to enhance cross-border payments and promote financial inclusion.

The BOK’s analysis referenced historical examples, such as the free-banking period in 19th-century America and Korea’s own Dangbaekjeon crisis, to highlight the risks associated with private money creation. The report also pointed to the 2023 failure of Silicon Valley Bank, when

temporarily dropped to $0.88, as a warning for stablecoins not backed by the U.S. dollar. “The stability of currency is rooted in trust, not merely in technological solutions,” the report argued, countering claims that blockchain alone can guarantee stability. The BOK stressed that private issuers must prove their commitment to the public good and maintain strong reserves to prevent systemic crises.

In contrast, Kyrgyzstan has adopted a different strategy, introducing a stablecoin pegged to the som on the

Chain and working toward a central bank digital currency (CBDC) in collaboration with former Binance CEO Changpeng Zhao. The KGST stablecoin is designed to facilitate international remittances and upgrade the country’s financial systems, with BNB possibly joining a future crypto reserve, . This reflects a broader movement among nations to use stablecoins and CBDCs to address shortcomings in traditional finance.

Hong Kong is also navigating a challenging environment as China puts a hold on stablecoin initiatives within the city. Although Beijing’s regulatory caution has tempered some optimism, analysts believe that competition with the U.S. will encourage further innovation. Yifan He of Red Date Technology,

, observed that China acknowledges the strategic value of digital assets in its contest with the U.S., even as it enforces stricter controls on cross-border capital movement.

The BOK’s cautious approach stands in contrast to the rapid expansion of crypto-related infrastructure. Recent

rounds, such as Coinbase’s $375 million purchase of the on-chain investment platform Echo and Pave Bank’s $39 million Series A, demonstrate ongoing investor faith in the industry. These trends indicate that stablecoins and blockchain-based financial tools may continue to grow despite regulatory challenges.

South Korea’s diplomatic context also plays a role. President Lee Jae-myung, aiming to strengthen the nation’s international presence after the martial law crisis, has highlighted the need to balance competition with China and cooperation with the U.S. in an

. The upcoming APEC summit in Gyeongju, where U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet, could influence regional perspectives on digital finance.

While the BOK advocates for a “bank-led” approach, some critics warn that this conservative view could cause South Korea to miss out on opportunities in a decentralized crypto economy. Rich O., APAC regional manager at OneKey, pointed out that the value of fiat currencies is already being challenged, as seen in the rising prices of gold and

. “KRW stablecoins represent Korea’s best chance to join the global value chain,” he commented.