Insights
Korean Won Stablecoins: What Should Korea’s Digital Currency Strategy Be?
As interest in privately issued Korean won stablecoins grows, the Bank of Korea has raised concerns about financial stability, monetary policy, and the allocation of benefits from money issuance. These are important questions that deserve a substantive response.
The challenge is to design a framework that allows useful innovation while managing those risks. The discussion needs to move beyond a simple choice between permission and prohibition.
SOOHO.IO supports innovation within an appropriate regulatory and supervisory framework. The aim is to combine effective safeguards against uncontrolled issuance with workable entry conditions for responsible providers.
Trust and connectivity in the global stablecoin market
Competition increasingly depends on practical utility, credible institutions, and network reach as well as decentralization. Trust includes not only technical security but also the ability of an accountable organization to respond when something goes wrong.
The Touchstone ecosystem: SOOHO.IO’s approach to connectivity
SOOHO.IO has spent the past two years developing Touchstone messaging infrastructure to support interoperability between different stablecoin protocols.
Why is this approach important?
Interoperability allows systems built on different technologies to work together.
It helps Korean stablecoin services connect with international markets.
It creates additional options for cross-border financial connectivity alongside established networks.
The capabilities behind this approach
Chainlink collaboration: Combining SOOHO.IO’s C2CC technology with Chainlink CCIP to extend connectivity.
International backing: SOOHO.IO was the first Korean blockchain company to receive investment from Consensys Ventures.
Enterprise experience: Delivery experience with organizations including Samsung SDS and LG CNS.
A proposed model for Korean won stablecoins
SOOHO.IO’s priorities are:
Build a consortium of trusted financial institutions and businesses.
Develop practical use cases with clear social and business value.
Connect the ecosystem with international networks.
SOOHO.IO is working with partners on consortium formation and preparing pilot services based on won-denominated stablecoins.
Interpreting the Bank of Korea’s evolving position
The article identifies the following progression in the policy discussion:
An initial emphasis on CBDC-based deposit tokens as an alternative to stablecoins.
A subsequent focus on prioritizing bank-led issuance.
A call for agreement among relevant authorities, including the Bank of Korea, in the approval process.
SOOHO.IO interprets this as a shift toward conditional participation with stronger supervision. Constructive engagement with authorities will be important in translating that discussion into a workable framework.
Building a shared approach
The central question is which rules and safeguards can create a stable, efficient environment. Progress depends on agreement about those practical requirements.
Key concerns and possible responses
The table below summarizes the concerns raised and responses proposed by supporters of won stablecoins.
Classification | Concern | Proposed response or alternative |
|---|---|---|
1. Monetary Policy | Reduced effectiveness of monetary policy • Excessive liquidity due to indiscriminate issuance. • Weaker confidence in money and reduced effectiveness of interest-rate policy. | One-to-one backing as a safeguard • Supporters argue that fully backed issuance changes the form of money rather than creating unbacked value. • Proposed safeguard: Full reserve backing and rigorous independent assurance. |
2. Financial Stability | Transmission of systemic risk • A loss of confidence in an issuer could trigger a run. • Crisis spreads to virtual assets and traditional financial markets. | Reserve quality and transparency • The Terra-UST incident was a failure of a 'collateral-less' model. • Alternatives: ① Restrict reserves to cash and short-term government bonds ② Mandate independent external audits ③ Diversify risk with a consortium model. |
3. Public Interest | Private capture of seigniorage • It is unfair for public revenue to shift to private companies. | Potential public benefits from innovation • Supporters argue that efficiency gains and additional tax revenue could offset some loss of public seigniorage. • Alternatives: Consider models that recoup part of the revenue to the national treasury through special corporate taxes or fund creation. |
4. Prevention of Illegal Activities | Money laundering and terrorist-financing risks • There is concern about the misuse of anonymity for illegal fund transfers and tax evasion. | Stronger technical controls • Blockchain records all transactions permanently, making it easier to trace. • Alternatives: ① Mandate KYC (Know Your Customer) for all wallets ② Apply the travel rule (rules for fund transfers). |
5. Consumer Protection | Insufficient consumer safeguards • Losses for investors during issuer bankruptcy or hacking. • Lack of deposit insurance schemes. | Protection through a defined regulatory framework • Licensing, reserve segregation, and clear legal rights can address gaps in protection. • Alternatives: ① Introduce a strict licensing system for issuers ② Mandate that customer reserves be kept in separate trust accounts. |
6. Digital Divide | Deepening financial exclusion (digital divide) • Older people and others who find digital tools difficult to use may face additional barriers. | Coexistence with existing payment methods • Add payment options without requiring an abrupt move to a cashless system. • Alternatives: Implement inclusive financial policies such as offline support centers and user education. |
7. Monetary Sovereignty | Competition with CBDCs and weakening of monetary sovereignty • If private stablecoins dominate the market, it could reduce the role of CBDCs and weaken national currency influence. | Complementary roles and controlled experimentation • Wholesale CBDCs and retail stablecoins could serve different functions within a broader system. • Proposed approach: Test technology and services in the private market and use those findings to inform CBDC design. |
Touchstone provides infrastructure that can support these approaches. SOOHO.IO is preparing consortium and pilot services intended to address the concerns while preserving room for useful innovation.
A shared vision for won stablecoins
SOOHO.IO aims to contribute as a technology and implementation partner to a secure, innovative Korean digital currency ecosystem.
💡 Core Competencies
Technical credibility: Experience supported by Consensys investment and enterprise partnerships.
Global connectivity: Strategic alliances with Chainlink and various mainnets.
Regulatory context: Practical understanding developed through participation in the Bank of Korea’s CBDC work.
Security expertise: A track record covering KRW 3.2 trillion in protected assets.
🎯 Focus Areas
Consortium collaboration: Building a cooperation network with reliable financial institutions.
Pilot services: Develop practical use cases for won stablecoins.
International connectivity: Securing global interoperability.
Progress through collaboration
Technology alone will not determine success. Trusted partnerships and connections between systems are equally important.
SOOHO.IO will continue working with financial institutions, authorities, and other stakeholders to provide dependable infrastructure for that process.
Explore the future of won stablecoins with SOOHO.IO.
Want more information or to discuss partnerships?
👉 Contact Us
SOOHO.IO Official Channels
Website: https://www.sooho.io/
X (Twitter): https://twitter.com/soohoio
LinkedIn: https://www.linkedin.com/company/sooho/
