South Korea may be preparing for a dramatic shift in its digital currency policy landscape, as leading presidential candidate Lee Jae-myung has proposed a new stablecoin backed by the Korean won.
The plan is aimed at preventing capital outflows and reducing reliance on foreign stablecoins, marking a bold attempt to assert greater monetary sovereignty in the fast-evolving global crypto market.
Lee, who heads the Democratic Party of Korea, introduced the concept during a recent policy discussion, positioning it as part of a broader digital asset strategy. The proposal has ignited debate among policymakers, economists, and industry stakeholders over the implications of introducing a government-sanctioned stablecoin in one of Asia’s most active crypto trading environments.
Between January and March 2025, South Korean crypto exchanges saw over 56.8 trillion won (approximately $40.8 billion) in asset outflows, according to data cited by The Korea Herald. Notably, nearly half of this activity was tied to foreign-issued stablecoins like Tether's USDT and Circle's USDC, which remain the default stable assets on most South Korean platforms.
Currently, South Korean law prohibits the issuance of domestic stablecoins, leaving exchanges dependent on U.S. dollar-pegged alternatives. Lee argues this legal vacuum is enabling large-scale capital flight, weakening the country’s financial autonomy. “We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,” he said during the panel.
Domestic Stablecoin Seen as Strategic Tool for Monetary Sovereignty
The proposal is not just about plugging capital flight. It also signals an attempt to position the South Korean won as a relevant unit of account and value storage within the crypto ecosystem. A won-based stablecoin could potentially reduce the dominance of the U.S. dollar in domestic digital markets while offering users lower on-ramp and off-ramp friction.
It could also serve as a stepping stone toward a broader state-backed digital currency regime or a central bank digital currency (CBDC), though Lee’s plan stops short of calling for a fully public CBDC.
The proposal, however, has drawn skepticism from monetary policy experts. Shin Bo-sung, a senior researcher at the Korea Capital Market Institute, warned that a won-pegged stablecoin could disrupt monetary policy by effectively expanding the money supply without the oversight mechanisms applied to traditional banking institutions.
“Stablecoins are essentially another form of banking, creating money out of nothing,” Shin noted. “We must not overlook the economic principles behind them. Allowing stablecoins could shift monetary control to private issuers and raise systemic risk.”
These concerns echo broader global debates around privately issued stablecoins and their macroeconomic impacts. In markets like the U.S. and EU, regulators have expressed concern that such assets could compromise monetary transmission mechanisms, facilitate illicit finance, and erode sovereign control over currency issuance.
Part of a Broader Pro-Crypto Election Agenda
Lee’s stablecoin proposal is part of a wider election campaign focused on digital finance. His platform also includes the legalization of spot crypto exchange-traded funds (ETFs), institutional participation in crypto markets, and infrastructure improvements such as integrated monitoring systems and reduced transaction costs.
Both Lee and his conservative rival Kim Moon-soo from the People Power Party have pledged to support spot crypto ETFs, signaling a potential bipartisan shift in crypto policy regardless of who wins the upcoming election. Institutional crypto investment - including by the National Pension Fund - could be allowed under Lee’s plan, pending the establishment of price stability thresholds and risk management frameworks.
To operationalize these ideas, the Democratic Party launched a Digital Asset Committee on May 13. The committee held its first meeting at the National Assembly Members’ Hall in Seoul and aims to promote crypto industry growth, address regulatory uncertainty, and pave the way for stablecoin issuance.
The new body joins an expanding constellation of crypto-related working groups in South Korea, including the Financial Services Commission’s Virtual Asset Committee (launched in 2024) and a 2022 public-private crypto task force. These groups are attempting to synchronize policy across the legislative, regulatory, and technological domains.
Digital Asset Basic Act in Development
Perhaps the most important legislative initiative tied to this push is the pending Digital Asset Basic Act, a bill expected to create a comprehensive framework for cryptocurrency and stablecoin regulation.
The draft legislation, still in development, is rumored to include requirements for stablecoin issuers to hold at least 50 billion won in reserves, gain formal approval from the Financial Services Commission (FSC), and adhere to regular audits and risk disclosure standards. Such measures are seen as essential to winning over skeptical lawmakers and central bank officials.
The law would also likely define the legal status of crypto assets, provide guidelines for tokenized securities, and address the licensing of digital asset service providers. If enacted, it would mark a significant departure from South Korea’s historically cautious approach to crypto regulation.
At stake is not only the future of crypto policy in South Korea, but also how the country positions itself in the global digital economy. South Korea remains one of the most technologically advanced nations in the world, with high crypto adoption and sophisticated financial infrastructure. But its regulatory posture has been inconsistent, marked by sudden crackdowns and regulatory gaps that leave businesses and investors in legal limbo.
A domestically issued, won-backed stablecoin could help South Korea assert control over its growing crypto economy while addressing capital control concerns. But it also raises complex issues about monetary sovereignty, systemic risk, and the role of public institutions in the evolving digital finance landscape.
International Implications and Competitive Pressures
South Korea is not alone in exploring stablecoin strategies as geopolitical tensions and de-dollarization trends mount. Countries including Japan, Singapore, and China are all pursuing variants of CBDCs or licensed stablecoins to protect local currencies and improve payment systems. South Korea’s discussions may also be influenced by these regional dynamics, as well as competition from the U.S. where regulatory momentum around stablecoins is building.
Meanwhile, the crypto industry continues to evolve, with new private issuers, platforms, and global financial institutions seeking footholds in the digital asset space. If South Korea fails to provide legal clarity or supportive infrastructure, it risks losing talent, capital, and strategic influence to more agile jurisdictions.
Whether or not the proposed won-backed stablecoin gains political traction, the conversation it has sparked reflects a broader turning point in South Korea’s digital finance policy. With national elections looming and capital flight a mounting concern, lawmakers must now grapple with how to integrate stablecoins into the formal economy without undermining financial stability.
As regulatory frameworks emerge and industry players respond, South Korea’s choices in the coming months could shape not only its domestic market, but also its position in the future global digital currency order.