South Korea is considering allowing domestic institutions to issue virtual assets, but stablecoins remain controversial.

Odaily Planet Daily reported that Lee Chang-yong stated at the Asian Financial Forum in Hong Kong that, due to market pressures, Korean authorities have allowed their residents to invest in virtual assets issued overseas. Financial regulators are considering establishing a new registration system to permit domestic institutions to issue virtual assets.

Lee Chang-yong pointed out that if a Korean won-denominated stablecoin is launched, its primary use might focus on cross-border transactions, while tokenized deposits are more suitable for domestic payment scenarios. However, he emphasized that there is still significant controversy surrounding stablecoins. His main concern is whether Korean won stablecoins could be used to circumvent capital flow management, especially when used in conjunction with US dollar stablecoins.

He further stated that US dollar stablecoins have a broad application scope and low entry barriers, with transaction costs significantly lower than directly using US dollars. When exchange rate fluctuations trigger changes in market expectations, funds may rapidly flow into US dollar stablecoins, causing large-scale capital transfers. Additionally, the participation of numerous non-bank institutions in stablecoin issuance significantly increases regulatory difficulty.

Moreover, Lee Chang-yong pointed out that South Korea itself has a highly developed fast payment system, so the advantages of retail central bank digital currencies (CBDC) are limited. Currently, the central bank is advancing tokenized deposits and wholesale CBDC through multiple pilot programs to maintain the existing two-tier financial system.