The appointment of Kim Yong-beom, former Deputy Minister of the Ministry of Economy and Finance, as the first policy chief of the Lee Jae-myung government is raising expectations that the new administration’s efforts to legislate 'cryptocurrency' will accelerate. This is because Kim has a background in the virtual asset industry.
Attention is also drawn to the fact that Kim has been advocating for a 'new international currency' to overcome the dollar system. He may propose the 'K-Digital Banco' initiative, led by Korea, at the Asia-Pacific Economic Cooperation (APEC) summit to be held in Gyeongju, North Gyeongsang Province, from late October to early November this year.
Since 2022, Kim has served as the representative of 'Hashed Open Research,' a think tank of Hashed, the largest blockchain-focused investment firm in Korea. During this time, he conducted research on blockchain and the cryptocurrency industry and published reports. He has also been a presenter at cryptocurrency-related seminars.
According to the economy sector on the 22nd, Kim released a report in March titled 'The Necessity of Won Stablecoins and Legislative Proposals.' In the report, Kim argued, 'If we leverage the strengths of the won stablecoin within the scope of maintaining manufacturing competitiveness, the won can maintain its competitiveness against foreign currencies.'
President Lee Jae-myung had previously pledged to issue won stablecoins during his presidential campaign. At that time, not only won stablecoins but also Bitcoin-based physical ETFs were included as targets for issuance in the campaign pledge. President Lee commented, 'We must create a market for won stablecoins to prevent the outflow of national wealth.'
Since the start of the Lee Jae-myung government, discussions in the political sphere regarding stablecoin legislation have also accelerated. Representative Min Byung-deok of the Democratic Party of Korea proposed a 'Digital Asset Basic Law,' which allows stablecoin issuance only by domestic corporations with a capital of over 500 million won, on the 10th. Rep. Min stated, 'To position Korea at the center of the digital economy, we must quickly establish the necessary systems.'
However, there are differing views between the central bank and regarding the qualifications of stablecoin issuers. The Bank of Korea, which is the currency issuer, is concerned that if the stablecoin issuer is non-banking, it could weaken monetary policy effectiveness. In this regard, Bank of Korea Governor Lee Chang-yong noted at last month's Monetary Policy Committee meeting, 'There must be a belief that currency can be exchanged at any time without price fluctuations,' adding that 'if institutions that are not subject to regulation hold substitutes, accidents like defaults can occur.'
However, the governor has recently shown a more conciliatory attitude toward the institutionalization of stablecoins. During a press briefing held on the 18th, he said, 'The Bank of Korea recognizes the need for the issuance of won stablecoins and does not oppose it.' However, he warned, 'If the exchange between dollars and won is easily made through stablecoins, it could pose challenges to foreign exchange management, so regulatory methods must be discussed.'
There is a difference in stance regarding the previous view that the spread of stablecoins could compromise the singularity of currency and affect the profitability of currency issuance and the effectiveness of monetary policy.
Alongside the legislation of stablecoins, the financial sector is also paying attention to Deputy Minister Kim's vision of a 'Digital Banco.' The Digital Banco proposal suggests creating a new international monetary order that goes beyond the existing single reserve currency system led by the United States, where multiple countries collectively contribute assets and operate based on digital technology. This concept is a reimagination of the Banco idea previously advocated by John Maynard Keynes, adapted to the digital age.
Kim holds a skeptical view on the sustainability of the dollar system, which is currently functioning as a reserve currency. He pointed out that the market’s evaluation of the dollar has changed, highlighted by rising U.S. Treasury yields and a declining dollar value. The 30-year U.S. Treasury yield hit a two-decade high of 5.15% annually last month. Concerns over increasing national debt and fiscal deficits are leading investors to shy away, thus raising the premium demanded by the government.
Deputy Minister Kim also pointed out that Treasury Secretary Scott Bessent's assertion that 'there will be no default on government bonds' itself illustrates a fracture in trust towards U.S. Treasuries. He remarked, 'Government bonds should inherently be assets that require no explanation, but the concept of 'conditional trust' has begun to emerge.'
The idea proposed by Kim as a 'post-dollar system' is a new international currency. He explained, 'If countries contribute physical and digital assets according to ratios, and issue a digital Banco designed on the basis of these underlying assets using blockchain technology, a fair and transparent international payment system that does not rely on specific countries can be achieved.' There are also suggestions that the Lee Jae-myung government may clarify this idea with the 'Digital Banco' initiative at the APEC meeting scheduled for this fall in Gyeongju.
Last month, former National Assembly Speaker Kim Jin-pyo, who served as Deputy Prime Minister and Minister of Finance, also made strong supportive remarks about the 'Digital Banco' at the 'Jeju Forum' held in Jeju. He stated, 'Mark Carney, the current Prime Minister of Canada and former Governor of the Bank of England, proposed a 'global electronic currency' as an alternative reserve currency to solve the excessive influence of the dollar in 2018,' adding that this is an alternative conceived through sufficient discussions with former Vice Minister Kim Yong-beom.
While it could serve as a sufficient alternative, economists have differing views on the feasibility of its realization. Some believe that there might not be adequate representation of the interests of larger economies due to the structure where all participating countries hold voting rights, potentially leading to their lack of participation.
A senior government official remarked, 'Deputy Minister Kim's idea is a noteworthy proposal for the digital currency transition. Given his expertise in this field, it is certain that the pace of discussion will accelerate,' but added, 'given the boldness of the proposal, it is necessary to examine it carefully.'