South Korea’s incoming central bank chief, Shin Hyun-song, has outlined an ambitious vision for the country’s digital currency landscape, placing central bank digital currencies (CBDCs) and bank-issued deposit tokens at the core of the system. Shin’s approach designates stablecoins as supporting tools rather than primary instruments, a decision set to redefine the digital payments framework in Asia’s fourth-largest economy.
New focus for digital currency strategy
A respected economics professor, Shin Hyun-song was recently nominated as the next governor of the Bank of Korea (BOK), and delivered a written statement to parliament during his confirmation process. Shin emphasized that CBDCs and bank-issued deposit tokens can coexist competitively, while also complementing stablecoins in selected areas.
This recalibrated vision marks a significant policy shift for South Korea, impacting foundational decisions around digital assets. According to Shin, stablecoins could play a useful role in sectors like programmable payments and tokenized asset trading, but should never replace government-backed money directly.
“I believe central bank digital currencies and deposit tokens can exist alongside stablecoins, in both complementary and competitive ways,” Shin Hyun-song asserted in his statement to lawmakers.
First fully regulated stablecoin enters the market
In February, Korea’s first fully regulated stablecoin, KRW1, was launched through a partnership between BDACS and Woori Bank. This development strengthens the role of banks as forerunners in the digital currency space, while also establishing heightened expectations around transparency and trust across the industry.
Shin expressed support for a stablecoin model pegged to the won, but underlined that the credibility of the issuing institution is essential. In his view, technological innovation alone is insufficient; public trust in the currency’s backing is irreplaceable.
Focus on regulation, security, and ongoing debates
The central bank’s approach insists on banks being at the forefront of stablecoin issuance, ensuring strict adherence to existing regulations. Shin argued that compliance obligations, such as anti-money laundering and customer verification, would be more effectively managed via established financial institutions.
Although blockchain-based assets are frequently promoted as tools for increasing efficiency in foreign exchange transactions, Shin urged caution. He pointed to ongoing regulatory uncertainties and potential additional costs in this rapidly evolving sector.
Shin also commented that cryptocurrencies, in general, fall short of meeting the core criteria for money: serving as a unit of account, a medium of exchange, and a store of value.
The Bank of Korea has repeatedly warned that digital tokens issued by private companies could threaten monetary policy and financial stability. The institution continues to advocate for robust oversight and comprehensive supervision to mitigate these risks.
Debate is ongoing among policymakers as to how open South Korea’s digital currency market should ultimately become. While regulators prioritize a bank-centric approach, some lawmakers have introduced proposals that would allow non-bank organizations to issue stablecoins as well.
