A KRW stablecoin could enhance South Korea’s global crypto role, fostering fintech growth and financial stability - IcoHolder.

A recent report from think tank Hashed Open Research and Four Pillars advocates for the introduction of a stablecoin tied to the Korean won (KRW), highlighting its potential to strengthen South Korea’s position in the global stablecoin race. Published on March 24, the study suggests that a won-based stablecoin could revolutionize digital transactions within the country while enhancing Korea's connections to the broader global digital asset ecosystem.

The report notes that a KRW stablecoin could help address inefficiencies in the local crypto market, fostering the growth of fintech industries that could emerge from this new ecosystem. It points out that the high liquidity of Korean crypto exchanges offers a distinct advantage for such a stablecoin, potentially making it more competitive compared to alternatives like the Japanese yen or the euro.

At the same time, the report raises concerns about the rising dominance of dollar-pegged stablecoins, such as Tether and USD Coin, in South Korea's market. These US dollar-based assets are contributing to capital outflows, a trend that could escalate and negatively affect the country’s financial stability and the value of the won.

Hashed Open Research also calls for a comprehensive regulatory framework for stablecoins, as these assets function both as payment tools and investment assets. The think tank proposes that both banks and non-banks should be allowed to issue stablecoins, but only under strict licensing and security requirements. Furthermore, the report stresses the need for domestic regulation of foreign-issued KRW stablecoins and suggests that foreign stablecoins pegged to other fiat currencies should meet equivalent regulatory standards to ensure a balanced and secure market.

In conclusion, the proposed KRW stablecoin represents a significant opportunity for South Korea to enhance its role in the evolving global crypto landscape while ensuring the integrity and stability of its financial system.