As the 2025 South Korean presidential race intensifies, leading candidate Lee Jae-myung of the Democratic Party has unveiled an ambitious financial innovation: a Korean won-pegged stablecoin. This proposal aims to combat capital outflows, strengthen national financial sovereignty, and position South Korea at the forefront of digital currency adoption.
The idea centers on creating a domestically issued, legally recognized stablecoin fully backed by the Korean won. Currently, South Korean crypto exchanges rely heavily on foreign-issued stablecoins like USDT and USDC due to existing legal restrictions on local stablecoin issuance. This dependency has raised concerns about wealth leakage and reduced monetary control.
According to The Korea Herald, Lee emphasized that a sovereign digital currency would help retain domestic capital within Korea’s financial ecosystem. “We must establish a stablecoin market anchored in the won to prevent national wealth from flowing overseas,” Lee stated during a recent policy briefing.
Addressing Capital Flight with Digital Innovation
Data from the first quarter of 2025 reveals a staggering 56.8 trillion KRW (approximately $40.8 billion) in asset outflows from South Korean cryptocurrency exchanges. Nearly half of these outflows are linked to transactions involving foreign stablecoins, highlighting the urgency behind Lee’s proposal.
A locally issued stablecoin could keep transactional value within domestic financial institutions, support local fintech innovation, and reduce reliance on U.S. dollar-denominated digital assets. By anchoring the stablecoin to the won and mandating full reserve requirements, the plan seeks to ensure price stability while fostering trust among users and regulators.
A Broader Vision for Crypto Integration
Lee Jae-myung’s stablecoin initiative is part of a comprehensive digital asset strategy designed to modernize South Korea’s financial infrastructure. Key components include:
- Legalizing spot cryptocurrency exchange-traded funds (ETFs)
- Allowing institutional investors, including national pension funds, to invest in crypto after meeting strict price stability and risk management criteria
- Establishing a centralized monitoring system for digital asset transactions
- Reducing trading fees to increase accessibility under government oversight
Notably, Lee’s main opponent, Kim Moon-soo of the People Power Party, also supports the introduction of spot crypto ETFs, signaling growing bipartisan recognition of digital assets’ economic potential.
However, institutional participation remains contingent on robust regulatory safeguards. Lee’s platform stresses the need for transparent auditing, investor protection mechanisms, and systemic risk controls before opening the market to large-scale public fund investments.
Regulatory Framework and Institutional Support
To advance this agenda, the Democratic Party launched a Digital Asset Committee on May 13, 2025. The committee convened its inaugural meeting at the National Assembly Members’ Office Building in Seoul, bringing together lawmakers, economists, and blockchain experts.
Its primary objectives include:
- Clarifying regulatory uncertainty in the crypto sector
- Drafting legislation for stablecoin issuance and oversight
- Promoting blockchain-based financial services
- Encouraging public-private collaboration in fintech innovation
This new body joins other national initiatives such as the Virtual Asset Committee formed in late 2024 and the Financial Services Commission’s (FSC) earlier crypto working group established in 2022.
Central to the party’s roadmap is the proposed Digital Asset Basic Act, which would create a clear legal foundation for cryptocurrencies and stablecoins in South Korea. Under the draft law:
- Stablecoin issuers must hold reserves of at least 50 billion KRW
- Issuance requires prior approval from the FSC
- Regular audits and disclosure obligations will be mandated
- Anti-money laundering (AML) and know-your-customer (KYC) standards will be strictly enforced
Economic Concerns and Criticisms
Despite its potential benefits, the stablecoin proposal has sparked debate among economists and financial regulators. Shin Bong-seong, a senior researcher at the Korea Capital Market Institute, voiced caution over unintended macroeconomic consequences.
“Stablecoins are not just technological tools — they represent a form of shadow banking,” Shin warned. “We cannot ignore the economic principles behind them. When private entities issue currency-like instruments backed by reserves, they effectively engage in credit creation outside the traditional banking system.”
His concerns center on three key risks:
- Monetary supply distortion: Unregulated stablecoin growth could inflate the effective money supply without central bank oversight.
- Bank disintermediation: If users shift deposits into stablecoins, commercial banks may face liquidity pressures.
- Systemic fragility: A loss of confidence in a major stablecoin could trigger rapid redemptions and destabilize financial markets.
To mitigate these risks, Lee’s team proposes operating the won-backed stablecoin within a tightly regulated framework supervised by the Bank of Korea and FSC — ensuring alignment with national monetary policy.
Frequently Asked Questions
Q: What is a won-backed stablecoin?
A: It’s a digital currency pegged 1:1 to the South Korean won, issued by authorized institutions and fully backed by reserve assets held in compliance with regulatory standards.
Q: How would it differ from USDT or USDC?
A: Unlike dollar-pegged foreign stablecoins, a won-backed version would be issued domestically under Korean law, supporting local monetary policy and reducing dependency on external financial systems.
Q: Could individuals use it for everyday transactions?
A: Yes — if implemented, it could be integrated into mobile payment systems, remittance platforms, and decentralized finance (DeFi) applications accessible to retail users.
Q: Is there precedent for government-backed digital currencies in Asia?
A: Yes — China has piloted its digital yuan (e-CNY), Japan is exploring a digital yen, and Hong Kong has advanced cross-border stablecoin trials with Thailand and the UAE.
Q: When might such a stablecoin launch?
A: If Lee Jae-myung wins the 2025 election and legislative support follows, pilot programs could begin as early as 2026, pending regulatory approval and technical development.
Q: Would it replace cash or traditional banking?
A: No — it would function as a complementary tool for digital payments and financial inclusion, not a replacement for existing monetary systems.
The Road Ahead for Digital Finance in Korea
Lee Jae-myung’s proposal reflects a broader global trend: nations seeking greater control over digital finance through sovereign-backed solutions. As central bank digital currencies (CBDCs) gain traction worldwide, South Korea stands at a pivotal moment — choosing between continued reliance on foreign-issued digital assets or building its own resilient, regulated alternative.
With strong public interest in blockchain technology and one of the world’s most active retail crypto markets, South Korea is well-positioned to lead in responsible digital asset innovation.
The success of this vision will depend not only on political will but also on collaboration between regulators, technologists, and financial institutions to balance innovation with stability. If executed carefully, a won-pegged stablecoin could become a cornerstone of South Korea’s 21st-century financial infrastructure.