KRW Stablecoin, What to Expect (ASA Opinion #10)

Key Takeaways

• Where does the debate over a won-denominated stablecoin stand today? Let’s break down the positions and recent moves from the government, the parliament, and the corporate world.
  

• The essence of a stablecoin boils down to a “net inflow versus net outflow” game. Blockchain expands access to finance, and the key question for governments and businesses is whether this greater accessibility will draw more capital in or push more capital out. Policy and strategy must be built on that calculus.
  

• In this “net inflow versus net outflow” framework, a won stablecoin is a tricky issue for both policymakers and corporations. Yet the global financial system is already tilting toward blockchain. If Korea hesitates, it risks falling badly behind the curve of financial innovation.

Four Pillars launched its research initiative on KRW stablecoins six months ago. In March, together with Hashed Open Research, we released “The Necessity of KRW Stablecoins and Proposal for a Legislative Framework” to make the case for why Korea needs a stablecoin tied to its national currency. Then in June, we followed up with “Blueprint for a KRW-Pegged Stablecoin for the Digital G2 Future,” offering a concrete vision for how such a stablecoin should actually be designed.

When the new administration took office earlier this year, expectations around a KRW stablecoin ran high. But on the ground, progress in the Korean market has been slower and more cautious than many anticipated. So what is the KRW stablecoin—an opening for real opportunity, or just a midsummer night’s dream?

Over the past months, Four Pillars has engaged with numerous public institutions, financial players, and corporations, gaining a clear sense of how the market is really evolving. In this piece, we take a brief look at where the debate on a KRW stablecoin currently stands and what we should realistically expect going forward.

1. It Takes a Long Time to Become Law

At present, five separate bills related to a KRW stablecoin have been introduced. From the ruling Democratic Party, lawmakers Min Byung-deok, Ahn Do-geol, Kim Hyun-jung, and Lee Kang-il have submitted proposals. From the opposition People Power Party, lawmaker Kim Eun-hye has put forward a bill as well. While the five drafts share a broadly similar framework, they differ in the details—such as who qualifies as an issuer, whether interest payments are allowed, and what collateral requirements must be met.

Beyond the lawmakers’ bills, the Financial Services Commission (FSC), a government body, is also preparing to introduce the second phase of Korea’s digital asset law, which will include stablecoin regulation. Since the FSC will ultimately hold the most authority over KRW stablecoins, the industry is watching closely for the bill the commission is expected to unveil soon.

Unlike in the United States, in Korea, if the legal framework for financial products is not yet in place, companies can do almost nothing in practice. For businesses, then, the single most important question is when the KRW stablecoin legislation will actually pass.

According to the legislative activity report of Korea’s 21st National Assembly, a government bill takes an average of 435.2 days to pass, while a member’s bill averages 657.1 days. The FSC’s bill, scheduled to be introduced in October 2025, falls into the government bill category. Even using that as a starting point, it would likely be early 2027 before a KRW stablecoin law could realistically be enacted. In other words, Korean companies—and foreign blockchain projects as well—will find it nearly impossible to move forward with concrete business plans until then.

2. The Odds Favor a Private Blockchain

From the start, Four Pillars has argued that for Korea’s blockchain industry to truly grow, a KRW stablecoin must be issued on public blockchains like Ethereum or Solana. But for now, that vision looks difficult to realize.

The two public authorities expected to oversee a KRW stablecoin are the Financial Services Commission (FSC) and the Bank of Korea. The central bank’s stance is clear: a KRW stablecoin is needed, but there is no reason to rush. Their preference is to start with a private blockchain and expand gradually. The newly appointed FSC chair has even stated that Korea should build its own custom blockchain and issue the stablecoin on top of it.

Their position is not without merit. Unlike a dollar stablecoin, a KRW stablecoin faces steep entry barriers tied to foreign exchange law and the risk of capital flight. From the perspective of managing a national economy, issuing a won stablecoin directly on a public blockchain would indeed be hard to control.

Korea is one of the few countries in the world that does not rely on Visa and Mastercard for domestic payments, preferring its own national system. It is also a country still haunted by the trauma of the 1997 foreign exchange crisis. Unsurprisingly, regulators prefer to keep the economy within predictable bounds. Seen in this light, the odds are very high that a KRW stablecoin will first be launched on a private rather than a public network.

For those rooting for the growth of Korea’s blockchain ecosystem, this direction feels disappointing. Yet even if it unfolds this way, opportunities remain for both domestic system integrators and global blockchain foundations.

• Domestic SI companies could win projects to build a Korea-specific blockchain tailored for stablecoin issuance. A telling example is LG CNS, the IT services arm of the LG Group, which built blockchain-based infrastructure for the Bank of Korea’s CBDC pilot.

• Public blockchain projects could still provide technical support for the private networks handling KRW stablecoin issuance and distribution. Avalanche subnets and Arbitrum Orbit are good examples. Any team with experience building and operating a large-scale public blockchain should have little difficulty tailoring one for Korea.

The utility of a stablecoin largely comes from being on a public network. For a KRW stablecoin to be competitive, it must either be issued on public rails from the start or, if that is politically impossible, eventually be expanded onto them.

If issuance is restricted to private networks, there is only one scenario in which a Korea-specific blockchain can succeed. There must be a single state-run private network and every financial service—stablecoins, tokenized assets, platform points—must onboard to it.

Such a setup would technically remain private, but for Korean citizens and the domestic market, it could mimic the user experience of a public blockchain. With one wallet service and one KRW stablecoin, users could integrate remittances, payments, stock trading, and crypto transactions in a single place. That is the only path likely to satisfy the government, the blockchain industry, and the users all at once.

Will a KRW stablecoin ever be allowed to launch on a public blockchain? We will have to wait and see. But the worst-case scenario is clear: multiple private networks springing up inside Korea, fragmenting the financial system.

3. Companies Stuck in Wait-and-See Mode

Hardly a day goes by without headlines in the Korean press about one company filing for a KRW stablecoin trademark or another considering a stablecoin business. Yet the reality looks very different from the outside. In Korea, corporate attitudes toward a KRW stablecoin fall into two camps.

The first camp is the active players. Generally, the smaller the company, the more aggressively it approaches the idea of a KRW stablecoin business. There are several reasons for this. Smaller firms face less regulatory risk than conglomerates, and given how hot the topic is, jumping in can also generate valuable PR.

But here lies the problem: stablecoins are a business of scale. On the issuance side, success requires boosting supply to build deep liquidity and network effects. On the distribution side, it means onboarding masses of users and merchants to create real utility. Small firms can enter the market, but they will hit a wall when it comes to scalability. Their best chances lie not in issuance or distribution, the core of the value chain, but in peripheral services around it.

The second camp is the cautious players. The larger the company, the more it tends to keep its distance, adopting an extremely careful stance. Two main reasons drive this caution. The first is legal uncertainty. As noted earlier, it will take anywhere from a year and a half to three years for KRW stablecoin regulation to be legislated. In Korea’s environment, it is nearly impossible for a major corporation to proactively launch a stablecoin service before a regulatory framework is in place.

The second reason is business viability. Unlike dollar stablecoins, which serve a massive global market, a KRW stablecoin is essentially domestic in scope. For large firms already running successful domestic financial businesses, the practical benefits of shifting to blockchain and stablecoins may simply not be compelling enough.

4. The Small Size of Korea’s Short-Term Bond Market: Is Issuance Even Possible?

Tether, the issuer of USDT, holds $130 billion in US T-Bills and repos. Circle, the issuer of USDC, holds $63 billion in money market funds. Korea, by contrast, does not issue government bonds with maturities under one year. Instead, the government occasionally issues Treasury Financing Bills to cover temporary funding needs, but their total size is only about $7 billion.

This means the short-term bond market that could serve as collateral for a KRW stablecoin is far too small, creating a fundamental barrier to issuance. Recently, the Korea Capital Market Institute floated the idea of issuing short-term treasuries specifically for a KRW stablecoin, but the Bank of Korea immediately pushed back, warning against the idea and pointing instead to Monetary Stabilization Bonds as an alternative.

These bonds, issued by the central bank to absorb liquidity from the market, usually have maturities of under three years. Some are as short as three months, and their total size is meaningful enough to be a potential option. Still, the market is not very large.

Beyond scale, neither treasuries nor stabilization bonds are particularly attractive as collateral for another reason: yield. US short-term bonds offer average yields in the 4 percent range, while Korean treasuries and stabilization bonds pay just above 2 percent. For issuers, this lower yield removes much of the incentive to operate a KRW stablecoin business, especially when issuance volume will already be far smaller than dollar stablecoins.

5. Other Misconceptions About KRW Stablecoins

There are also a few misconceptions in the Korean market about KRW stablecoins that deserve correction.

The first is that the risks of issuing on a public network are exaggerated. Even if a KRW stablecoin were issued on a public blockchain, regulations and issuer-defined rules could be enforced directly through smart contracts. For example, trading could be restricted to verified Korean users who have completed KYC. Securitize has already shown how this works, with tokenized securities like BUIDL that comply with regulatory requirements entirely through smart contract logic. This means a KRW stablecoin could circulate on a public network while allowing authorities to fully monitor flows and prevent unforeseen incidents.

The second misconception is that Korea, already a highly advanced financial market, has little to gain in terms of user experience from adopting a KRW stablecoin. This is only half true. It is true that Korea’s fintech infrastructure is excellent and already gives users easy access to a wide range of financial services across multiple platforms. In that sense, a blockchain-based stablecoin would not create a dramatic leap in convenience. But it would bring several important benefits:

• Interoperability across platforms: Today, not only are financial services fragmented across platforms like Naver, Kakao, Toss, and Upbit, but even across functions such as remittances, stock trading, crypto trading, and payments. Blockchain and stablecoins could connect these silos, offering users a far more integrated experience.

• Micropayments: In the current financial system, fees make small transactions uneconomical. Blockchain and stablecoins enable them. Imagine paying only for the minutes of video you watch on an OTT service, or receiving payouts proportional to the ads you view. A microtransaction economy could flourish.

• Lower fees: This may not please card issuers and networks, but in an ideal stablecoin payment system, they are not needed. That translates into savings of one to two percent per transaction. For businesses with high transaction volumes, this could mean enormous profit recovery, much of which could be passed on to consumers as new benefits.

6. The Essence: A Game of Net Inflows and Outflows

At its core, the debate around a KRW stablecoin comes down to one thing. It is a game of net inflows and net outflows. We live in an era of fragmented financial backends. Different continents, different countries, even within a single country, banking, payments, and securities networks remain siloed.

Blockchain has the power to bind all of this into a single system. The reason stablecoins and RWAs are such hot topics in the United States today is precisely because of a push to replace outdated financial backends with blockchain. In the broader flow of technological progress in finance, blockchain is inevitable.

If blockchain can weave together multiple financial systems, the result is greater accessibility. A Korean user could pay for Nigerian services in won. A Vietnamese user could buy K-content in dong. An American could spend Lotte L-Points. Whatever you can imagine becomes feasible on a blockchain foundation.

This increase in accessibility is why governments and corporations must ask themselves whether a KRW stablecoin would bring more inflows into their country or their platform, or more outflows. For the United States, the answer is easy. The dollar’s dominance means more inflows, so dollar stablecoins enjoy full support. For Korea, the calculus is less straightforward. Corporations, too, must ask whether opening their products to the wider world will mean gaining more than they lose.

Seen through this lens, one can begin to judge whether a KRW stablecoin business would help or hurt.

7. A Top-Down Approach

Korea is a financial powerhouse. In countries with unstable currencies, citizens have natural bottom-up incentives to adopt stablecoins. In Korea, users have little reason to switch to a KRW stablecoin on their own.

If the government or corporations truly want to introduce one, they must embed it into the backend in subtle ways. Users should benefit from new features without even realizing that stablecoins are powering them.

For example, overseas remittances could become easier. Payments across platforms could become seamless. Platform points could become more easily redeemable. Subscription models based on micropayments could appear. All of these could be delivered top-down through a stablecoin and blockchain backend.

If exchanges replace won with KRW stablecoins, users will simply follow. If fintech giants like Naver, Kakao, or Toss adopt a KRW stablecoin option and layer in incentives, users will simply follow. If a streaming platform launches a micropayment system based on KRW stablecoins, users will simply follow.

8. So What Is the Outlook for a KRW Stablecoin?

Over months of conversations with public institutions, financial players, and corporations, I have not encountered a single actor with a sharp sense of purpose or a concrete plan for a KRW stablecoin. Let’s be honest. This is because the Won, when made more accessible through blockchain, remains an ambiguous proposition.

And yet I believe Korea must move forward. In the United States, the administration, the SEC, and the CFTC are all pushing blockchain across the board. There is momentum to replace banking, payment, and securities infrastructure with blockchain rails. This means the global shift from outdated backends to blockchain is only a matter of time.

A KRW stablecoin is already late. But if Korea waits until 2027 to launch one on a private blockchain, as current discussions suggest, the country will already be far behind the global curve. In this difficult game of stablecoins, the real question is whether Korea can still chart a meaningful direction.