South Korea is entering a critical phase in defining rules for its local stablecoin market as the ruling Democratic Party has set a firm deadline of 10 December 2025 for financial authorities to submit a unified government-backed stablecoin proposal.
Lawmakers have warned that failure to meet this timeline will prompt them to advance legislation independently, signalling the urgency to create clear rules for won-pegged digital assets.
At the heart of the debate is a clash between the Bank of Korea (BOK) and the Financial Services Commission (FSC).
Both agree that regulation is necessary, but they differ sharply on control.
The central bank insists that banks must hold at least 51 percent of any stablecoin issuer, citing concerns over monetary stability, bank liquidity, and anti-money laundering safeguards.
The FSC, however, cautions against concentrating too much power with the central bank.
Officials argue that a bank-dominated model could stifle innovation from South Korea’s robust tech sector.
Instead, the FSC favours a more open framework that would allow non-bank entities, including major tech companies like Naver and Kakao, to issue and operate stablecoins.
This disagreement has stalled three competing stablecoin bills currently under review in the National Assembly.
Analysts suggest that a compromise may emerge in the form of a dual-authority system, with the FSC overseeing licensing and compliance, while the BOK monitors reserves, systemic risks, and monetary stability.
Despite the legislative impasse, private companies are advancing their own initiatives.
Major banks have begun exploring a won-backed stablecoin to streamline domestic payments and integrate financial services across platforms.
Meanwhile, tech giants are independently testing blockchain payment tools, wallet integrations, and early stablecoin prototypes.
These moves heighten pressure on regulators to establish rules before market innovation outpaces official oversight.
Kakao, for instance, is actively preparing a stablecoin task force involving multiple affiliates, with potential international partnerships for converting foreign currencies into stablecoins.
Kakao Bank, one of South Korea’s largest neobanks, is reportedly considering leveraging its partnership with Coinone to facilitate issuance.
Insiders note the company aims to target K-pop fans, building on KakaoPay’s overseas payment volume, which rose 47.5 percent year-on-year in the first three quarters of 2025.
However, regulatory hurdles remain.
The Bank of Korea continues to oppose tech-led issuance, while domestic crypto exchanges are prohibited under the Virtual Asset User Protection Act from trading coins issued by themselves or affiliated parties.
Any forthcoming legislation is expected to address these limitations.
The Democratic Party has made its intentions clear.
Kang Jun-hyeon, a lawmaker and secretary of the National Assembly’s Financial Services Committee, said:
“If the government plan doesn't come by this deadline, I will drive it forward through a legislator-initiated bill at the committee secretary level.”
Kang Jun-hyeon, a DPK secretary, attending a closed-door consultation at the National Assembly in Seoul on Monday.
The party hopes to discuss the bill during the current National Assembly session and pass it in January 2026.
Officials have reportedly discussed a potential consortium model in which banks collectively hold over 50 percent of shares while collaborating with the FSC and BOK.
However, the FSC confirmed that no definitive agreement has yet been reached.
A spokesperson noted:
“No concrete decision has been made on matters such as allowing a consortium in which banks hold 51 percent or more of equity.”
The BOK maintains that banks are best positioned to issue stablecoins because they are already under regulatory oversight and have experience with anti-money laundering protocols.
Critics, however, argue that centralising issuance among banks could limit competition and innovation.
Sangmin Seo, chair of the Kaia DLT Foundation, said:
“It would be even more valuable if the Bank of Korea could provide guidelines on how these risks can be mitigated and what qualifications are required for an issuer to be regarded as trustworthy.”
As discussions continue, the ruling party seeks a balance between the BOK’s stability concerns and the FSC’s push for industrial innovation.
The next two weeks will be crucial in determining whether South Korea can finalise a unified stablecoin framework or face a rare confrontation between lawmakers and regulators over digital currency.
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