🚨 Digital Dollar Invasion
Today Korean Economic News for Beginners | 2025.11.16
0️⃣ Stablecoins Threatening Korean Currency Sovereignty, Won Defense Urgent
📌 US Digital Dollar Spread, Payment Ecosystem Threat...Need for Won Stablecoin Highlighted
💬 Stablecoins are digital currencies fixed to the value of legal tender, mainly linked 1:1 to the dollar to perform payment, remittance, and exchange functions without price changes. The US is already speeding up stablecoin expansion through legislation, and Korea's well-developed electronic payment infrastructure makes US-based stablecoins likely to spread quickly. The problem is that if dollar-based stablecoins deeply penetrate the domestic payment market, won usage will decrease, the Bank of Korea's monetary policy effects will weaken, and ultimately currency sovereignty could be shaken. Experts emphasize, "If digital dollarization accelerates, economic control tools like interest rate policy or exchange rate management could become powerless," stressing the need to introduce won-based stablecoins. It's time for Korea to respond quickly to not fall behind in the global digital currency competition.
1️⃣ Easy Understanding
You may have heard the word "stablecoin" often these days. Since it's called a coin, you might think it's an investment product with prices going up and down like Bitcoin, but stablecoins are completely different. They're more like "digital cash."
Bitcoin's price changes too much to use as a payment method. Bitcoin worth $10,000 today could be $8,000 or $12,000 tomorrow. Imagine buying coffee or paying rent with this. Shop owners and landlords wouldn't want to accept it.
Stablecoins were created to solve exactly this problem. Most stablecoins are tied 1:1 to the US dollar. This means 1 USDT (Tether) or 1 USDC (USD Coin) always maintains the value of 1 dollar. How is this possible? Because the companies that issue stablecoins actually hold dollars. For example, if the company issuing Tether creates 10 billion USDT, they must keep 10 billion actual dollars in safe places like banks or government bonds.
So stablecoins have stable prices and can be used like "cash" in digital environments. They're used in many places: when sending money overseas, trading on crypto exchanges, or using DeFi (decentralized finance) services. Crypto investors also use stablecoins to safely park their money temporarily after selling Bitcoin.
But why is this a problem for Korea's economy?
First, most stablecoins are dollar-based. USDT and USDC, the world's most used stablecoins, are both linked to the dollar. There are almost no won-based stablecoins. This means the dollar's dominance is getting stronger in the digital currency world.
Second, Korea has very well-developed electronic payment infrastructure. Easy payment services like Kakao Pay, Naver Pay, and Toss are deeply embedded in daily life. You can buy coffee and pay for taxis with just a QR code. This environment familiar with digital payments paradoxically means new digital currencies like stablecoins can spread quickly.
For example, what if some overseas shopping mall or global platform offers "5% discount for USDC payments"? Or an event saying "2x points for stablecoin payments"? People would naturally start using dollar stablecoins instead of won.
At first, it might only be used for overseas shopping or global service payments, but it could gradually expand to domestic payments too. In fact, some countries already have cases of receiving salaries or paying rent in stablecoins. Because Korea's digital environment is so developed, these changes could happen faster than expected.
So why is this a problem?
If domestic transactions start happening in dollar stablecoins instead of won, the Bank of Korea's monetary policy won't work properly. For example, let's say the Bank of Korea lowers interest rates to stimulate the economy. Normally, when interest rates fall, people borrow more money to spend and invest, so the economy improves. But what happens if people mainly use dollar stablecoins instead of won? No matter how much the Bank of Korea adjusts interest rates, the effect on the real economy decreases.
Exchange rate management also becomes difficult. When the won-dollar exchange rate surges and the Bank of Korea tries to intervene, if many people already hold dollars through stablecoins, the effect is reduced. In the end, currency sovereignty - the country's power to control the economy through its own currency - weakens.
This isn't just a theoretical worry. In some developing countries, as their own currency values became unstable, people started preferring stablecoins. Korea isn't at that level yet, but because the digital payment environment is developed, it could spread even faster here.
What's the solution?
Experts argue that won-based stablecoins should be introduced. In other words, create digital currency fixed to won value, like 1 KRW stablecoin = 1,000 won (or 1 won). Then even if domestic digital payments become active, they'd be won-based, so currency sovereignty could be protected.
Of course, it's not easy. There are many challenges to solve: who will issue it (Bank of Korea? Private companies?), how to regulate it, how to connect it with the existing financial system, etc. But with the US already quickly proceeding with stablecoin legislation and China experimenting with digital yuan, Korea can't fall behind.
In the end, the stablecoin issue goes beyond just "a new payment method appeared" to the question of how to protect currency sovereignty in the digital age.
2️⃣ Economic Terms
📕 Stablecoin
A stablecoin is a cryptocurrency whose value is fixed to legal tender or assets.
- It can be used like "digital cash" because prices barely change.
- Examples include Tether (USDT) and USD Coin (USDC), most linked 1:1 to the dollar.
- Widely used for payments, remittances, crypto trading, and DeFi services.
📕 CBDC (Central Bank Digital Currency)
CBDC is digital currency issued and managed directly by central banks.
- Unlike stablecoins issued by private companies, CBDCs have high credibility because they're issued by the state.
- There are controversies about control and surveillance because all transactions can be recorded by the central bank.
- China's digital yuan is a representative example, and Korea is also researching digital won.
📕 DeFi (Decentralized Finance)
DeFi is a system that provides financial services through blockchain technology without intermediaries like banks.
- It processes deposits, loans, exchanges, and investments through automated smart contracts.
- Stablecoins are used as the basic currency in DeFi, used for deposits, loans, collateral, etc.
- Regulatory blind spots and hacking risks remain important security challenges.
📕 Currency Sovereignty
Currency sovereignty is a country's authority to issue its own currency and independently operate monetary policy.
- It's a core tool for controlling the economy through interest rate adjustments, exchange rate management, and money supply control.
- Currency sovereignty weakens when foreign currencies (like dollar stablecoins) dominate domestic payments.
- Weakened currency sovereignty can lead to reduced response capacity during economic crises.
3️⃣ Principles and Economic Outlook
✅ Digital Expansion of Reserve Currency
The dollar is already the world's reserve currency, but stablecoins are becoming a powerful tool to extend that influence to the digital realm.
First, the US is quickly pushing for stablecoin legislation. Since 2023, the US Congress has been discussing stablecoin-related bills, and in 2025, a full regulatory framework is expected. Issuers must hold sufficient reserves, undergo regular audits, and guarantee that users can get 1:1 refunds even in bankruptcy. This legislation increases stablecoin credibility and plays a decisive role in establishing them as global payment methods. For the US, it's a strategy to maintain and expand dollar dominance in the digital age.
Second, dollar stablecoins provide overwhelming convenience for cross-border payments and remittances. Traditional international remittances take a long time and have high fees because they must go through multiple banks. But stablecoins can be sent anywhere in the world within minutes at much lower costs. Especially in developing countries, the tendency to prefer stable dollar stablecoins over their own currencies is getting stronger. This ultimately has the effect of promoting digital dollarization.
Third, global platforms and companies have started adopting stablecoin payments. PayPal launched its own stablecoin PYUSD, and Visa and Mastercard are building stablecoin payment infrastructure. Reports say giant companies like Amazon and Apple are also considering adopting stablecoin payments. If this trend accelerates, billions of people worldwide could routinely use dollar stablecoins.
In the reserve currency competition of the digital age, the US is preemptively gaining advantage through stablecoins.
✅ Sovereignty Weakening from Payment Currency Changes
If stablecoins start being used instead of won in domestic transactions, the Bank of Korea's monetary policy effects rapidly weaken.
First, there are concerns about interest rate policy becoming powerless. The Bank of Korea adjusts the base interest rate to manage the economy by controlling the flow of funds in the won market. When rates are lowered, loans increase and consumption and investment grow; when raised, the opposite happens. But what if people trade and save in dollar stablecoins instead of won? No matter how much the Bank of Korea adjusts interest rates, the impact on the real economy will be limited. It's like turning a thermostat but the room temperature doesn't change.
Second, exchange rate management capacity also weakens. When the won-dollar exchange rate surges, the Bank of Korea stabilizes the rate by selling dollars and buying won using foreign exchange reserves. But if many people already hold dollars through stablecoins, the government's foreign exchange market intervention effect decreases. Also, it becomes harder to prevent capital from rapidly flowing out during crises. Because people can convert won to stablecoins and send them overseas with just a few clicks.
Third, the link with fiscal policy also breaks. Even if the government increases fiscal spending to stimulate the economy, if that money flows out into stablecoins instead of circulating within the won economy, the effect is halved. In the end, the various levers for controlling the national economy gradually stop working.
Weakening currency sovereignty is a serious problem that reduces the ability to recover independently during economic crises.
✅ Balance Between Regulatory Speed and Industry Growth
Stablecoins create new industry opportunities, but loose regulations can cause financial crises, so a careful approach is needed.
First, transparency in collateral management is key. Stablecoin issuers must hold actual dollars or safe assets equal to the coins they issue. But in the past, some stablecoins were controversially issued without sufficient reserves. Tether also once faced doubts about its actual dollar holdings. If a major stablecoin collapses due to insufficient reserves, it could lead to chain failures like in the 2008 financial crisis. Therefore, regular audits and transparent disclosure are essential.
Second, Korea should also start experimenting with won stablecoins. China is already conducting digital yuan pilot projects in several cities, and Europe is also accelerating preparations for the digital euro. Korea is researching digital won but is cautious about actual implementation. But if we're too slow, it could be after dollar stablecoins have already dominated the domestic market. A realistic approach could be experimenting in a limited scope using sandbox methods and gradually expanding.
Third, we must consider both industry development and risk management simultaneously. Stablecoins can be the foundation for new industries like fintech, blockchain, and DeFi. Too-strong regulations that prevent industry development are also a problem, but reckless neglect creates bigger risks. Countries are trying to find a balance between stability and innovation, and Korea must also quickly establish systems.
Creating an environment where won stablecoins and related infrastructure can be tested and expanded within the regulatory system is urgent.
4️⃣ Conclusion
Stablecoins are no longer just a story for crypto investors. Changes that could affect our daily payments, remittances, and savings are underway within the next few years.
The US is already expanding digital dollar dominance through stablecoin legislation. Global companies like PayPal, Visa, and Mastercard are building stablecoin ecosystems, and soon stablecoin payments may be possible on Amazon or Apple. Korea can't fall behind in this trend.
Especially for Korea, the fact that digital payment infrastructure is world-class can paradoxically be a risk factor. Because people are already more familiar with digital payments than cards or cash, dollar stablecoins could spread quickly once they come in. If that happens, won usage will decrease, the Bank of Korea's monetary policy effects will weaken, and ultimately currency sovereignty could be shaken.
The solution is to introduce won-based stablecoins. Even if digital payments expand, if they're won-based, currency sovereignty can be protected. Of course, it's not easy. There are complex challenges ahead, such as who will issue and manage them, how to connect with the existing financial system, and how to handle security and regulations.
But time is not on our side. China is experimenting with digital yuan, and Europe is preparing digital euro. The US is already capturing the market through private stablecoins. If Korea approaches too cautiously, the game could already be over.
From an individual perspective, we need to understand and prepare for these changes. If stablecoins become commonplace, overseas shopping and remittances could become much more convenient. But at the same time, we need to consider which stablecoin to use, whether it's safe, and if there are exchange rate risks.
In the end, the stablecoin era is not a choice but a necessity. Depending on how Korea introduces and manages won stablecoins, the future of our economy's payment structure and currency stability will be determined. What we need now is both caution and boldness.
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