South Korea is taking steps to regulate stablecoin transactions in response to the increasing use of these digital currencies in international trade. The Ministry of Economy and Finance is planning to impose foreign exchange regulations on cross-border stablecoin transactions to address the growing role of stablecoins, especially those pegged to the US dollar, in trade activities outside traditional regulatory frameworks.
The government aims to stabilize the expanding number of cross-border crypto transactions involving stablecoins and mitigate potential risks that could arise from their use as a payment tool beyond the virtual asset ecosystem. The Financial Services Commission (FSC) has announced that stablecoin regulation will be a focus during the second phase of the Virtual Asset User Protection Act, taking into account regulations from other regions like the EU and Japan.
Stablecoins, such as Tether, have gained significant influence in global financial markets, with reserves nearing those held by South Korea itself. Critics have raised concerns about the delay in addressing the growing use of stablecoins in trade, highlighting the potential threats unregulated capital flows could pose to monetary sovereignty and the financial system.
In contrast to South Korea’s gradual approach, the EU and Japan have swiftly implemented regulatory frameworks for stablecoins. The EU’s Markets in Crypto-Assets (MiCA) regulation allows financial institutions to issue stablecoins, while Japan treats stablecoins as a recognized form of payment subject to foreign exchange reporting rules for large transactions.
South Korea is also considering developing a legal framework for issuing stablecoins tied to the Korean won, laying the groundwork for regulating stablecoins linked to both domestic and foreign currencies. The government is expected to ease restrictions on companies holding crypto accounts, allowing corporations to engage in stablecoin-based trade and capture these transactions in official statistics to provide a more accurate picture of the economy.
Countries like the US, the UK, and Australia are also working on legislation to regulate stablecoins, and South Korea intends to reference these international precedents to develop its own robust regulatory system for stablecoin transactions. By addressing the growing use of stablecoins in international trade, South Korea aims to ensure a secure and transparent environment for cross-border cryptocurrency transactions.