Korea’s central bank lobbies for further role in stablecoin oversight

A new report out of Korea says the Bank of Korea (BOK) has proposed the creation of a multi department body to provide policy input for stablecoins. It even gave a nod to the US GENIUS Act’s Stablecoin Certification Review Committee, which consists of the FDIC, the Federal Reserve and the Treasury.

“A pan-governmental regulatory response is necessary,” the BOK stated, according to the Korea Herald. “A policy body consisting of relevant authorities should be considered.” This is part of a submission to the policy planning committee.

A month ago, Korea’s new government proposed legislation that handed oversight over stablecoins to the Financial Services Commission (FSC) rather than the Bank of Korea. A second complementary draft legislation proposes a role for the central bank requiring the FSC to take the central bank’s concerns into account. Given that the two documents conflict on this and other related matters, including stablecoin capital requirements, it’s unclear which one will take precedence.

The central bank’s latest suggestion of a committee could give all the represented parties a veto over stablecoin issuance.

However, the GENIUS Act only gives its Review Committee a limited role. The committee is involved in decisions over whether a large public entity that’s not a financial firm can issue a stablecoin. Some of the global concerns are that a social media company could leverage its distribution to dominate the market. In Korea, social media firm Kakao has a substantial blockchain presence, as well as a major stake in a bank with the same name. Additionally, the US committee provides input on the recognition of stablecoins issued in foreign jurisdictions. It also plays an important part in certifying that state regulators are complying with the requirements of the Act.

Banks eye stablecoins

Beyond the large listed firms, the GENIUS Act has no restrictions on the type of company that can launch a stablecoin. Nor does the draft legislation published in Korea. By contrast, the BOK previously stated a preference for only allowing banks to issue stablecoins.

But there’s competition for funding between bank stablecoins and central bank led initiatives. Several banks participating in wholesale CBDC and tokenized deposit trials have set up a consortium to issue stablecoins, with the next phase of central bank led trials postponed, for now. At issue is the high costs of the trials with an uncertain commercial outcome. Whereas the banks envision a shorter path to profitability with stablecoins.

These banks have created an ever expanding consortium coordinated by the Open Blockchain DID Association. The aim is to create a stablecoin issuance infrastructure which could be shared, but based on trademark filings, each bank is planning its own coin. When unveiled in April, the consortium consisted of six large banks and the Korea Financial Telecommunications & Clearing Institute (KFTC). We previously reported the addition of Hana Bank, IM Bank and K Bank. Now the bank count is up to 11 with the entrance of BNK Financial Group, which owns two regional banks, Busan Bank and Kyongnam Bank, reflecting growing industry momentum toward private stablecoins.

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