South Korea's central bank governor Lee Chang-yong has raised significant concerns about the potential risks posed by private companies issuing stablecoins pegged to the national currency. According to his warning, such financial instruments could fundamentally disrupt the country's financial system by transferring control of the won to non-bank entities.
In a recent statement that echoes broader global concerns about cryptocurrency regulation, the Bank of Korea chief warned of the specific risks associated with won-pegged stablecoins, highlighting how they might lead to capital flight and undermine monetary policy effectiveness.
Governor Lee emphasized that private stablecoins not only challenge the central bank's authority over monetary policy but could also unexpectedly increase demand for the US dollar, potentially threatening South Korea's economic sovereignty. This concern comes at a time when digital currencies are gaining traction worldwide while regulators struggle to establish appropriate frameworks.
Drawing a historical parallel, Lee compared unregulated stablecoin issuance to the monetary chaos of the late Joseon Dynasty (1392–1897), when competing currencies led to severe inflation and a catastrophic loss of public trust in the financial system. He stressed that without proper regulatory oversight, modern Korea risks experiencing similar financial instability and market fragmentation.
The central bank governor's warnings highlight the delicate balance between financial innovation and systemic stability, particularly as cryptocurrencies continue evolving and challenging traditional monetary systems worldwide.