Why South Korea Can’t Agree on Who Should Issue Stablecoins

Key takeaways

• Korea’s crypto bill stalled over rules for stablecoin issuers.

• The central bank wants banks to maintain control, often set by a threshold of “51%”.

• Regulators and lawmakers worry that a bank-only model will limit competition.

• Companies are lining up, with Toss planning a won-backed stablecoin once the rules are finalized.

South Korea’s next major crypto law is being delayed by a seemingly simple question: Who can issue a won-backed stablecoin?

The proposed digital assets fundamental law has slowed as regulators battle over whether stablecoins should be treated as bank money or a licensed digital asset product.

At the center is the Bank of Korea’s push for a “bank-first” model, ideally through consortiums led by banks with at least 51% bank ownership, arguing that stablecoins could, in their view, impact monetary policy, capital flows and financial stability if they move too quickly.

The Financial Services Commission and lawmakers worry that a regime dominated by banks could significantly limit competition and slow innovation.

This impasse should now push the bill back to 2026.

Why Korea cares about won stablecoins

Stablecoins in South Korea are already important for local traders transferring value to crypto markets, often via dollar-pegged tokens to access offshore liquidity. If stablecoin use expands, it could amplify cross-border flows and complicate foreign exchange management, particularly in a market where crypto participation and retail exposure are unusually high.

This is why the Bank of Korea continues to view issuer rules as a “financial stability” decision. Officials say a careful, gradual rollout, starting with tightly regulated banks, reduces the risk of sudden outflows or loss of control over how “private money” flows.

At the same time, policymakers who want more companies to be allowed to issue won-backed stablecoins see the issue as one of competitiveness. If Korea does not create a reliable local option, users will continue to rely on foreign stablecoins, leaving the country with less regulatory visibility and fewer opportunities to develop a domestic stablecoin industry.

Did you know? In the 12 months through June 2025, purchases of Korean won-denominated stablecoins totaled approximately $64 billion in South Korea, according to Chainalysis.

The regulatory context

The first major crypto regulation law in South Korea was the Virtual Asset User Protection Act. It is built around market security, including segregation and custody of customer funds, with banks designated as custodians of user deposits. The framework also mandates storage in cold wallets, criminal penalties for unfair trading, and insurance or reserve requirements to cover hacks and system outages.

However, this “phase 1” framework primarily focuses on how exchanges and service providers protect users. The unresolved dispute lies in the next step, the proposed Digital Assets Basic Law, in which lawmakers and regulators aim to define the issuance, supervision and eligibility of stablecoin issuers.

This is precisely where the bill gets bogged down. When Korea tries to answer the question of who can issue stablecoins, the Bank of Korea and the financial regulator diverge.

Did you know? South Korea’s crypto rules require approved service providers to maintain at least 80% of customer assets in offline cold wallets to protect against hacks and theft.

Three institutions, three incentives

South Korea’s stablecoin standoff is ultimately a dispute over which institution should have primary responsibility when private money becomes systemically important.

The Bank of Korea views won-backed stablecoins as a potential expansion of the payment system and, therefore, a monetary policy and financial stability issue. Its top executives have argued for a gradual rollout that would start with tightly regulated commercial banks and then expand to the broader financial sector to reduce the risk of disruptive capital flows and ripple effects during times of market stress.

The Financial Services Commission views the same product as a regulated financial innovation that can be overseen through licensing, disclosures, reserve standards and ongoing enforcement, without the market being forced on banks as winners by default.

This is why the FSC opposed the idea that issuer eligibility should be determined primarily by ownership structure and why the disclosed and proposed approaches would have looked at multiple models rather than considering bank supervision as the only safe option.

Then there are lawmakers and party task forces, weighing policy promises, industry pressure and competitiveness optics.

Some proposals envisage relatively low capital thresholds for issuers, which the central bank has described as a growing risk of instability. Others argue that a bank-focused regime could simply delay product-market adaptation and push activity toward offshore dollar stablecoins.

Even the debate over the “51% rule” has a local twist. The Bank of Korea has warned that allowing non-bank firms to take the lead could conflict with the long-standing separation between industrial and financial capital in Korea.

Did you know? Major Korean exchanges such as Bithumb and Coinone added USDT/KRW trading pairs starting in December 2023, making stablecoins easier to access directly with the won.

The “51% rule”: what it is, why it exists and why it is controversial

In its strictest form, the Korean media’s “51% rule” suggests that a won-backed stablecoin issuer should be a consortium led by commercial banks, with banks holding at least 51% of the stake. This structure would effectively ensure that banks control governance, risk management and, most importantly, buyback operations.

The logic is that if stablecoins begin to function as money on a large scale, they can influence the transmission of monetary policy, capital flows and financial stability. A bank-led structure aims to import prudential discipline from day one, including capital standards, a supervisory culture, anti-money laundering (AML) controls and crisis management, rather than attempting to strengthen these safeguards after a non-bank issuer has already reached systemic size.

The opposition is just as direct. The Financial Services Commission and pro-industry lawmakers argue that bringing banking supervision into the rules could reduce competition, slow experimentation and effectively exclude capable fintech or payments companies that could offer better distribution and user experiences.

Critics also point out that mandatory ownership thresholds are an indirect way of regulating risk, not the only one, given the existence of reserve requirements, audits, buyback rules and supervisory powers.

It’s not just about who issues stablecoins

Even if South Korea ultimately allows non-banks to issue won-backed stablecoins, regulators still have many levers to prevent the product from exhibiting risk characteristics similar to those of shadow banks.

The government’s proposed approach focused on the quality and segregation of reserves, steering issuers toward highly liquid, low-risk collateral such as bank deposits and government debt. The reserves would be held by a third party and structurally separated from the issuer to reduce the fallout from bankruptcy.

Then there is the “monetary” principle of rapid repayment at par. The publicly discussed proposals include clear redemption rules and tight deadlines, designed to prevent a stablecoin from turning into a closed-end fund during periods of market stress.

Korea’s broader regulations are already moving in this direction. The Financial Services Commission has built a user protection regime around strict custody standards and operational requirements, such as offline storage thresholds for customer assets, demonstrating that regulators are comfortable with installing concrete technical safeguards rather than relying solely on licensing decisions.

Industry Pressure and What to Watch for in 2026

There is urgency. The regulatory standoff is unfolding as the market is already gearing up for won-backed stablecoins.

Large commercial banks are preparing for a bank-led model, while large consumer platforms and crypto-native players are exploring how they might issue or distribute a won-pegged token if rules allow. Many banks and large companies are reportedly positioning themselves in this market even as the political debate drags on.

Fintech companies, however, do not want to operate within a consortium controlled by banks. Throwing is a clear example of this. The company said it was preparing to issue a won-based stablecoin once a regulatory framework is in place, viewing the legislation as the gate to whether the product can be launched.

This push and pull is why delays are significant. The more Korea debates issuer eligibility, the more day-to-day stablecoin activity defaults to offshore dollar-based infrastructure, and the harder it becomes to argue that the slowness reflects a deliberate choice rather than wasted time.

So what happens in 2026? The scenarios considered include:

• Licensing in stages, with banks first and broader participation later, is an approach that the Bank of Korea has publicly supported.

• Open license with a “systemic” level, where large emitters face heavier requirements.

• Bank-led consortia are permitted but not required, making the fight over the “51% rule” easier.