Will it be implemented in 2027? Unveiling the capital games and political struggles behind the "difficult birth" of the Korean won stablecoin.

The development of the Korean won stablecoin is in trouble, with the legislative process expected to take at least two years. Coupled with the government's inclination towards private blockchain solutions, its actual implementation may not happen until 2027. As the global financial system rapidly shifts towards blockchain, South Korea's slow pace may leave it far behind in the wave of financial innovation. This article provides a deep analysis of the capital games and political struggles behind the "difficult birth" of the Korean won stablecoin.

Legislative process is lengthy: Korean won stablecoin may have to wait until 2027

Currently, South Korea has proposed five independent bills related to the Korean won stablecoin. Members of the ruling Democratic Party, Min Byung-deok, Ahn Doo-chul, Kim Hyun-jung, and Lee Gang-il have submitted proposals, while member Kim Eun from the opposition People Power Party 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 the 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 have the highest regulatory authority over stablecoins pegged to the Korean won, the industry is closely watching the upcoming draft regulations.

According to the legislative activity report of the 21st National Assembly of South Korea, the average approval time for government proposals is 435.2 days, while the average processing time for member proposals is 657.1 days. The stablecoin bill that the Financial Committee plans to submit in October 2025 falls under the category of government proposals. Even starting from this point in time, the legislation for the Korean won stablecoin is likely to be realized only by early 2027. This means that before then, it is almost impossible for Korean companies or even foreign blockchain projects to advance specific business plans.

Public Chain vs Private Chain: The South Korean Government Prefers Private Blockchain Route

From the beginning, the blockchain industry has claimed that for South Korea to truly develop, it must issue a 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 of Korea and the Bank of Korea. The stance of the Korean central bank is clear: there is a need to launch a won stablecoin, but there is no reason to rush. They prefer to start with a private Blockchain and gradually expand. The newly appointed chairman of the Financial Services Commission even stated that Korea should build its own customized Blockchain and issue stablecoins based on that.

Their position is not unreasonable. Unlike the USD stablecoin, the KRW stablecoin faces high entry barriers from foreign exchange regulations and risks of capital flight. From the perspective of national economic management, it is indeed difficult to regulate the issuance of KRW stablecoin directly on a public blockchain.

South Korea is one of the few countries in the world that does not rely on Visa and MasterCard for domestic payments, but prefers to use its own payment systems. This country is still deeply affected by the trauma of the 1997 foreign exchange crisis. Therefore, regulators are more inclined to keep the economy within a predictable range. From this perspective, the Korean won stablecoin is highly likely to be launched on a private chain rather than a public chain.

Corporate Polarization: Aggressive vs Cautious

Korean media almost has headlines every day reporting that a certain company is applying for a trademark for a Korean won stablecoin or another company is considering engaging in stablecoin business. However, from an external perspective, the reality seems quite different. In South Korea, companies' attitudes towards the Korean won stablecoin are divided into two factions.

The first category of camp is the active faction: generally speaking, the smaller the size of the enterprise, the more positive the attitude towards developing the Korean won stablecoin business. There are multiple reasons behind this: compared to large conglomerates, small enterprises face less regulatory risk, and coupled with the hot topic itself, getting involved in stablecoins can also generate significant public relations effects.

But the problem is: stablecoins are scale-economy businesses. On the issuing side, success requires expanding supply to establish high liquidity and network effects. On the circulation side, it is necessary to attract a large number of users and merchants to create actual utility. Small businesses can enter the market, but they will face bottlenecks in scalability.

The second camp is the cautious faction: the larger the enterprise scale, the more likely it is to maintain a wait-and-see attitude and adopt a very cautious stance. This cautious attitude mainly stems from two reasons: first, legal uncertainty; second, commercial viability. Unlike the dollar stablecoin that serves a vast global market, the Korean won stablecoin essentially belongs to the domestic market category. For large enterprises that have successfully developed domestic financial businesses, the practical benefits that transitioning to Blockchain and stablecoins can bring may not be enough to constitute sufficient attraction.

Structural Barriers: The Korean Short-Term Bond Market is Small

Tether Ltd. 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 the total scale is only about $7 billion.

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

Apart from scale, both government bonds and stablecoins face another issue of insufficient attractiveness as collateral: yield. The average yield on U.S. short-term bonds is around 4%, while the yield on South Korean government bonds and stablecoins is only slightly above 2%. For issuers, this lower yield significantly weakens the motivation to operate the Korean won stablecoin business.

The Game of Net Inflow and Net Outflow: The Nature of Stablecoins

The discussion surrounding the Korean won stablecoin ultimately revolves around a game of net inflows and net outflows. The Blockchain has the ability to integrate all fragmented financial systems into a unified system, enhancing the accessibility of financial services.

The improvement in accessibility is precisely the issue that governments and businesses around the world must consider: will the launch of the Korean won stablecoin bring more capital inflows to the country and the platform, 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, and thus the dollar stablecoin receives full support. However, for South Korea, this trade-off is more complex.

Prospects for Korean Won stablecoin

After months of dialogue with public institutions, financial institutions, and enterprises, very few participants have a clear sense of purpose or concrete plans regarding the KRW stablecoin. This is because, even though the Korean won has become more accessible through Blockchain technology, its value positioning is still not clear enough.

However, in the United States, the government, the Securities and Exchange Commission, and the Commodity Futures Trading Commission are fully promoting the development of Blockchain technology. The banking industry, payment systems, and securities infrastructure are gradually being replaced by Blockchain technology, and this trend suggests that the global transition from outdated backend systems to Blockchain is just a matter of time.

The launch of the Korean won stablecoin has already been delayed. However, if Korea waits until 2027 to launch on a private blockchain as currently suggested, they will be far behind the global development pace. The real question in this tough stablecoin competition is whether Korea can still develop a meaningful direction for growth.