Lee Chang-yong Warns of Stablecoin Threat Pegged to Won in the Banking Sector

The Governor of the Bank of Korea, Lee Chang-yong, has expressed deep concerns regarding the proliferation of stablecoins pegged to the Korean won. In a statement cited by NS3.AI, Lee identified several regulatory challenges and systemic risks that may arise from the development of cryptographic instruments tied to the local currency.

Risks of Capital Control Evasion Become a Major Concern

Lee Chang-yong highlighted that the launch of the Korean won stablecoin opens opportunities for market participants to evade the capital control mechanisms established by monetary authorities. This risk is viewed seriously because it could undermine the effectiveness of ongoing monetary and fiscal policies. He emphasized the need for a thorough understanding of alternative capital flows that could emerge through digital asset channels.

Currency Volatility and Market Speculation as Challenges

Although stablecoins pegged to the US dollar have shown significant popularity in the global market—mainly due to more efficient transaction costs—Lee warned that exchange rate fluctuations between the won and the dollar could create loopholes for speculative activities. Cross-currency volatility has the potential to become a fertile ground for traders to exploit price differences, thereby exerting additional pressure on market stability.

Regulation of Non-Bank Entities Becomes a Complex Issue

The regulatory challenges raised by Lee Chang-yong also touch on institutional dimensions. The growth of stablecoin issuance by entities outside the traditional banking ecosystem—such as fintech platforms and blockchain companies—creates regulatory gray areas. The Bank of Korea faces difficulties in enforcing comprehensive oversight of these non-bank actors, necessitating a more robust and adaptive regulatory framework.