South Korean presidential front-runner proposes won-based stablecoin

South Korea’s Democratic Party leader, Lee Jae-myung, advocates for a Korean won-backed stablecoin to curb capital flight and bolster national financial sovereignty. His proposal stems from concerns over significant capital outflows – totaling 56.8 trillion won ($40.8 billion) in the first quarter of 2025, with a substantial portion attributed to foreign stablecoins like USDT and USDC. Lee argues that a domestically issued stablecoin would retain wealth within South Korea, reducing reliance on foreign digital assets. This initiative is part of a broader digital asset strategy that includes legalizing spot cryptocurrency ETFs, a position shared by rival candidate Kim Moon-soo. Both candidates aim to allow institutional investors like the National Pension Fund to participate in cryptocurrency markets once price stability is achieved. This would involve implementing an integrated monitoring system and reducing transaction fees.

However, Lee’s stablecoin proposal faces criticism. Shin Bo-sung, a researcher at the Korea Capital Market Institute, cautions against the potential for increased money supply and the shift of monetary control to private issuers. Shin emphasizes the inherent risks of creating money from nothing, highlighting the fundamental economic principles involved. Despite these concerns, the Democratic Party is actively pursuing crypto regulation, recently establishing a Digital Asset Committee to develop comprehensive cryptocurrency policies and address regulatory uncertainty. This committee’s work complements existing initiatives, including the Virtual Asset Committee and a public-private task force, both launched by the Financial Services Commission (FSC).

Furthermore, the party plans to introduce the Digital Asset Basic Act, which would legally define cryptocurrencies and stablecoins. This bill mandates substantial reserves (at least 50 billion won) for issuers and requires FSC approval. The interplay between these initiatives—the proposed won-backed stablecoin, ETF legalization, institutional investment, and the Digital Asset Basic Act—demonstrates a concerted effort by the Democratic Party to shape a comprehensive regulatory framework for the cryptocurrency sector in South Korea. The success of these proposals will significantly impact the country’s financial landscape and its position within the global cryptocurrency market.