South Korea’s central bank flags FX risks as lawmakers debate stablecoin issuance

South Korea’s stablecoin debate remains stalled as the central bank raises concerns over capital flows, issuer oversight and US dollar-linked risks.

South Korea’s central bank chief warned that Korean won-denominated stablecoins could complicate capital flow management, adding a note of caution to an ongoing debate among lawmakers over whether and how domestic stablecoins should be issued, according to local reports.

Speaking at the Asian Financial Forum in Hong Kong, Bank of Korea Governor Lee Chang-yong said authorities are considering a new registration framework that would allow domestic institutions to issue virtual assets, according to a report by Radio Television Hong Kong. He cautioned, however, that stablecoins remain controversial because of their potential impact on foreign exchange stability.

Lee said won-pegged stablecoins would likely be used mainly for cross-border transactions. He warned that won stablecoins, combined with US dollar stablecoins, could be used to bypass capital flow management measures in periods of volatility. 

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