The Democratic Party of Korea is accelerating legislation related to stablecoins based on the Korean won. As virtual assets have emerged as a major issue in the presidential election, it plans to introduce a "Digital Asset Basic Act" next week, aimed at incorporating digital assets into the regulatory framework. The legislation specifies the issuance criteria for won-based stablecoins, as well as transaction and storage institutions to legalize government regulation. In particular, it intends to ease the previously considered standard of "50 billion won in capital" to allow startups and others to participate as issuers.
◇"Utilizing platforms can secure competitiveness"
On the 21st, Lee Jae-myung, the presidential candidate from the Democratic Party of Korea, held an expert discussion on won-based stablecoins at the National Assembly. The discussions centered around the notion that won-based stablecoins could play a role in overcoming currency exchange uncertainties, expanding global monetary sovereignty, and complementing the limitations of Central Bank Digital Currency (CBDC). Attending the discussion were Representative Kwon Chil-seung, the chairperson of the Democratic Party's Central Election Committee, and Representative Lim Kwang-hyun, deputy director of the policy headquarters.
Won-based stablecoins have recently become a focal point in presidential candidate TV debates. Above all, many point out that the demand will likely be low. With dollar-based stablecoins like USDT (Tether) and USDC (Circle) dominating the circulation, establishing the competitiveness of a won-based currency is seen as difficult. Considering the "one-to-one linkage" with the won's value, it has also been argued that the ability for anyone to generate currency with a reserve of 50 billion won presents high risks.
The Democratic Party's discussion was structured as a rebuttal to these criticisms. Representative Min said, "At a time when the financial paradigm is shifting, we can sufficiently secure the competitiveness of won-based stablecoins if we concentrate our capabilities," highlighting policy support as essential for securing competitiveness. He added, "By utilizing our strengths in platforms, we can cultivate a won-based stablecoin ecosystem centered on emerging markets like Southeast Asia."
He referenced the U.S. Senate's passage of the "Genius Act" (Stablecoin Act) on the 20th (local time) during the 'cloture vote' meant to finalize discussion. If a majority is achieved in the upcoming Senate full meeting, the bill will pass. According to NBC, among Republicans, there is an expectation for passage by or before U.S. Memorial Day (26th). Representative Min stated, "It's like the filibuster has ended in Korea, and the bill has essentially passed," adding, "Korea must actively design the global order."
Representative Kwon also noted, "If we utilize won-based stablecoins as an intuitive and quick means of attracting global capital, we can also overcome existing exchange rate risks." He pointed out instances where startups faced failed investment opportunities with foreign venture capital due to exchange rate risks and complex legal issues related to foreign exchange. He further stated that won-based stablecoins could reduce uncertainties such as discrepancies between currencies and delays in financial transactions.
◇"Won-based stablecoins, complementing CBDC limitations"
During the discussion, claims were made that won-based stablecoins could complement the limitations of CBDC. CBDC refers to a method where the Central Bank directly allocates and manages 'domestic digital credit' through existing bank applications. This has led to criticisms about the lack of scalability for overseas remittances and payments. Professor Lee Jong-seop of Seoul National University's Business Administration Department stated, "To innovate outbound retail finance, the introduction of a won-based stablecoin based on public blockchain is necessary."
Regarding scalability, experts have suggested that the issuer of stablecoins should not be limited to financial institutions. This means the scope of permitted issuers must be broadened to expand the currency territory. Yoon Min-seob, a director at the Digital Consumer Research Institute, said, "If we limit stablecoin issuers to banks like in Japan, a decrease in scalability is inevitable," and suggested considering the use of won-based stablecoins as a "means of expanding currency territory" during the legislative process.
◇Lee Jae-myung vs. Lee Jun-seok 'Stablecoin War'
Earlier, on the 18th, candidate Lee Jae-myung stated during the first TV debate among presidential candidates, "Creating a won-based stablecoin means putting in a sum as collateral and allowing the issuance of coins accordingly, ensuring stability." He mentioned the intention to create laws that would allow the domestic issuance of won-based stablecoins. There are also considerations to establish a 'Digital Asset Committee' under the presidential office to handle virtual asset work.
In response, Lee Jun-seok, the Reform Party candidate, expressed curiosity about "(the ability to maintain reserves of a coin that is linked one-to-one with the value of the won) and what measures will be established to prevent illegal circulation of funds." He questioned whether the differences between USDC and USDT were understood, adding, "Circle can freeze funds," and said, "if candidate Lee Jae-myung claims to execute stablecoins without a concrete strategy, it will stir the market as if conducting an operation."