🚨 Stablecoin Regulations Speed Up
Today Korean Economic News for Beginners | 2025.11.02
0️⃣ US GENIUS Act Passes, Korea Cautious on KRW-Pegged Launch
📌 Stablecoins Shake Global Markets, Korea Still Has a Long Way to Go
💬 Through the 'GENIUS Act' passed in the United States, stablecoins are quickly entering regulated financial markets. Last year, US dollar-pegged stablecoins processed about $27.6 trillion in annual transfers, more than double the combined annual transaction volume of Visa and Mastercard. In Korea, stablecoin use has surged, with holdings reaching about $365 million as of late August this year, more than doubling in one year. However, the Korean government remains cautious about creating regulations for KRW-pegged stablecoins, raising concerns that Korea may fall behind in global payment infrastructure. Experts warn that "without KRW-pegged stablecoins, Korea's position in international payment networks will inevitably weaken."
1️⃣ Easy Understanding
A new type of digital currency called stablecoins is spreading rapidly, centered in the United States. Unlike regular cryptocurrencies, stablecoins have stable prices and are used for actual payments and transfers. However, Korea has not yet created regulations and risks falling behind global trends.
Let me first explain what stablecoins are. Regular cryptocurrencies like Bitcoin or Ethereum can change in price by tens of percent in a single day, making them hard to use as actual payment methods. You might prepare Bitcoin today to buy something worth $1,000, but tomorrow that Bitcoin's value could drop to $800.
In contrast, stablecoins have their value fixed to legal currencies like the US dollar or Korean won. For example, a 1-dollar stablecoin (USDT or USDC) always maintains a value of 1 dollar. How is this possible? Companies that issue stablecoins deposit actual cash or US Treasury bonds worth 1 dollar in banks for every 1-dollar coin they create. In other words, all issued stablecoins are backed by real assets.
Thanks to this stability, stablecoins have started being used in real life. For example, when sending money to a friend overseas using bank transfers, fees are expensive and it takes a long time. But with stablecoins, you can send money in minutes with much cheaper fees.
In the United States, a law called the 'GENIUS Act' was passed to officially integrate stablecoins into the regulated financial system. This means stablecoin issuers, while receiving government oversight, are now recognized as trustworthy financial institutions like banks. Thanks to this, transactions made with US dollar-pegged stablecoins last year reached an amazing $27.6 trillion. This is about 15 times Korea's GDP.
Stablecoin use is also growing rapidly in Korea. Koreans living overseas and students studying abroad use stablecoins a lot to avoid currency exchange rate changes when sending money. In fact, stablecoin holdings traded on Korean exchanges reached $365 million as of August this year, more than doubling from a year ago.
However, the problem is that Korea doesn't yet have 'KRW-pegged stablecoins.' Currently used stablecoins are all pegged to US dollars, so Koreans also have to trade based on dollars. This means the Korean won's international status weakens, and Korea's financial system could be left out of global payment networks.
The government is cautious about introducing KRW-pegged stablecoins for several reasons. First, because the Korean won isn't widely used internationally, there's uncertainty about whether there would be enough demand for KRW-pegged stablecoins. Second, if stablecoins become active, capital outflow could become easier and destabilize the foreign exchange market. Third, there are concerns about possible misuse for financial crimes or money laundering.
In the end, while stablecoins are likely to become important financial infrastructure in the future, Korea faces the risk of falling behind in global competition as regulations are delayed.
2️⃣ Economic Terms
📕 Stablecoin
A stablecoin is a cryptocurrency with stable value pegged to legal currency or other assets.
- Issuers hold actual cash or treasury bonds worth 1 dollar as collateral for each 1-dollar stablecoin they create.
- Major stablecoins include USDT (Tether) and USDC (USD Coin), all pegged to the US dollar.
- Thanks to price stability, they are actually used as payment and transfer methods.
📕 GENIUS Act
The GENIUS Act is a US law that integrates stablecoins into regulated financial markets.
- The full name is 'Guiding and Establishing National Innovation for US Stablecoins Act.'
- Stablecoin issuers receive government oversight but are recognized as legitimate financial institutions.
- With this law's passage, the US secured global leadership in the stablecoin market.
📕 Regulated Financial Market
A regulated financial market is a financial market that receives regulation and oversight from government or financial authorities.
- It's a market where licensed institutions like banks, securities firms, and insurance companies participate.
- Being included in the regulated market means receiving legal protection but also following strict regulations.
- Stablecoins being integrated into the regulated market means being recognized as official financial products.
📕 Fiat Currency-Pegged
Fiat currency-pegged means a cryptocurrency's value is fixed to government-issued currencies like dollars or won.
- Pegged at a 1:1 ratio, so one stablecoin always maintains the value of one unit of the pegged fiat currency.
- To maintain the peg, issuers must hold sufficient collateral assets.
- Dollar-pegged is most commonly used, while won or euro-pegged versions are being discussed.
3️⃣ Principles and Economic Outlook
✅ Stablecoin Value Stability Mechanism
Let's look at how stablecoins maintain price stability.
First, fiat currency collateral method is most common. Major stablecoins like Tether (USDT) or USD Coin (USDC) guarantee value by having issuers deposit actual dollars in banks. For example, for a company called Circle to issue 100 million USDC, they must deposit 100 million dollars in banks. This guarantees users can exchange USDC for actual dollars anytime. This method is transparent and safe, but issuers must regularly undergo audits to verify they truly hold sufficient collateral.
Second, algorithmic methods exist but stability is questioned. Some stablecoins tried to maintain price using only algorithms without actual collateral. TerraUSD (UST) was a representative example, which collapsed in 2022 causing trillions of won in damages. Attempts to maintain price only through supply and demand without collateral proved very vulnerable to market shocks. Therefore, providing collateral with fiat currency or other assets has now become mainstream.
Third, transparent auditing and regulation are key to trust. Stablecoin issuers must regularly receive audits from external accounting firms to verify actual collateral assets match issuance amounts. The US GENIUS Act institutionalized exactly this transparency and oversight. By receiving regulation, they gain government trust, allowing more people to use them with confidence.
Stablecoin stability depends on holding sufficient collateral and transparent oversight systems.
✅ Changes in Global Payment Networks and Dollar Dominance Strengthening
Let's analyze how stablecoin expansion affects international financial order.
First, stablecoins overcome limitations of existing international remittance systems. Traditional international remittances go through multiple banks via systems like SWIFT, taking a long time and costing expensive fees. For example, sending $1,000 from Korea to the US costs $20-30 in fees and takes 2-3 days to arrive. But using stablecoins, fees are only $1-2 and transfers complete in minutes. Because of this efficiency, stablecoin use is increasing not just for personal remittances but also in business transactions.
Second, dollar-pegged stablecoin expansion further strengthens US dollar dominance. Currently, over 99% of the stablecoin market is pegged to dollars. Whenever people worldwide trade with stablecoins, they end up using dollars. This gives the US two advantages. First, increased dollar demand allows maintaining lower US Treasury bond rates, and influence over international financial systems also grows. Meanwhile, other countries face the risk of their currencies' international status weakening.
Third, a new digital financial ecosystem is forming. Decentralized finance (DeFi) platforms based on stablecoins are growing rapidly. On these platforms, people can use financial services like loans, deposits, and investments without banks. For example, services have emerged where you can deposit stablecoins and receive 5-10% annual interest. Of course, with less regulation comes more risk, but for traditional financial institutions, new competitors have appeared.
Stablecoin expansion is reshaping the international financial system, especially consolidating US dollar dominance.
✅ Korea's Dilemma and Need for KRW Stablecoins
Let's look at why the Korean government hesitates to introduce KRW stablecoins and the problems this causes.
First, the Korean won's weak international status may limit demand. Unlike the dollar or euro, the Korean won is rarely used in international payments. The won accounts for less than 2% of global foreign exchange transactions. Therefore, even if KRW stablecoins are created, there may not be many users besides Koreans. From the government's perspective, they might wonder "should we create regulations and spend oversight costs when there's no demand?"
Second, there are concerns about capital outflow and foreign exchange market instability. If KRW stablecoins become active, people can easily convert won to digital currency and send it overseas. Especially during economic crises, 'bank run' phenomena could occur with massive capital outflows. Having experienced the 1997 foreign exchange crisis, Korea naturally worries about such capital outflow possibilities. Also, if stablecoin issuers become insolvent, it could lead to cascading financial instability.
Third, not having KRW stablecoins is still a long-term loss. Currently, Koreans also use dollar stablecoins extensively. This ultimately means the won's influence decreases and domestic financial institutions become isolated from new digital financial ecosystems. Also, if global companies prefer dollar stablecoins over won when trading with Korea, we bear all the currency exchange rate risks. Experts warn that "if we don't prepare regulations now, catching up later will be even harder."
Introducing KRW stablecoins is a difficult task requiring balance between short-term risks and long-term necessity.
✅ Future Outlook and Necessary Responses
Let's summarize the future outlook for stablecoin markets and strategies Korea should take.
First, stablecoin markets will certainly continue growing. Currently, global stablecoin market capitalization is about $150 billion, but experts forecast it will exceed $500 billion by 2030. Especially in developing countries, as people without bank accounts can use financial services with just smartphones, demand will explode. Also, cases of companies using stablecoins in international transactions will increase.
Second, Korea needs a gradual and cautious approach. Rather than rushing blindly, we can first experiment on a small scale through sandbox (regulatory exemption) systems. For example, allowing some fintech companies to issue KRW stablecoins in limited scope, then improving regulations based on results. Countries like Singapore and Switzerland successfully fostered cryptocurrency markets this way.
Third, international cooperation is also important. It's worth considering creating an Asian regional stablecoin cooperation system with neighboring countries like Japan and Singapore. For example, if standards are created so stablecoins pegged to won, yen, and Singapore dollars are mutually compatible, intra-Asian trade would become much more convenient. This could become an alternative to the dollar-dominated stablecoin market. Also, regulatory cooperation like anti-money laundering must proceed together.
To not fall behind in the stablecoin era, cautious but active response is needed.
4️⃣ In Conclusion
Stablecoins are no longer a distant future story but ongoing financial innovation. While the US completes institutionalization and captures the market, Korea remains stuck in observation mode, which is concerning.
The US GENIUS Act passage isn't just one law, but a strategic move to secure leadership in digital finance. By integrating a market with over $27 trillion in annual transactions into the regulated system, the US succeeded in extending dollar dominance into the digital age.
Korea's dilemma is understandable. There are indeed various constraints like foreign exchange market stability, capital outflow concerns, and the won's limited international status. However, if we keep hesitating for these reasons, Korea's position in the global digital financial ecosystem will inevitably weaken.
Particularly concerning is that Koreans are already actively using dollar stablecoins. Without KRW stablecoins, all transactions end up in dollars, leading to long-term won influence weakening and increased currency exchange rate risks.
Therefore, what's needed now is not blind opposition or blind support, but systematic and gradual approach. We must carefully build the KRW stablecoin ecosystem while conducting small-scale experiments through sandboxes, establishing strict oversight systems, and strengthening international cooperation.
Time is not on our side. While major countries like the US, Europe, and Japan rapidly organize regulations and capture markets, if only Korea falls behind, catching up later will be even harder.
In the end, the stablecoin era is an unavoidable future. We need wise approaches that are cautious yet active, managing risks while not missing opportunities.
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