# South Korea Urges Regulation for Won-Based Stablecoins Amid U.S. Dollar Dominance

Seoul—As President Donald Trump seeks to expand the U.S. dollar’s influence through stablecoins, the debate over the introduction and regulation of won-based stablecoins gains momentum in South Korea. Industry experts argue that to prevent the outflow of global digital assets and build a locally focused financial ecosystem, South Korea must act decisively.

Hashed Open Research (HOR) released a report on September 24 titled “The Necessity of Won-Based Stablecoins and Legislative Proposals,” highlighting the pressing need for such measures. The report flags the increasing threat posed by U.S. dollar-backed stablecoins like Tether (USDT) and USD Coin (USDC) to Korea’s financial sovereignty and won-based economic framework.

# Escalating Influence of Dollar-Backed Stablecoins

Since being listed on Bithumb and Upbit at the end of 2023, USDT’s weekly trading volume has exceeded $1 billion (approximately KRW 1.4 trillion), becoming the second most traded asset after Bitcoin. HOR’s analysis indicates that the surge of dollar-pegged stablecoins is causing significant economic concerns. The primary use of these stablecoins is to facilitate fund transfers to foreign exchanges or individual wallets, leading to an ‘Exodus from Korea’ phenomenon. This capital flight not only disrupts the digital asset market but also poses a broader threat to Korea’s financial autonomy and the won-based economic zone.

For example, since USDT’s listing on Upbit in June 2024, it has accounted for 60% of total capital outflows. Data from the Financial Services Commission show that the outflow of digital assets abroad grew more than threefold, from KRW 21.6 trillion in the second half of 2022 to KRW 74.8 trillion in the first half of 2024, following the adoption of these stablecoins.

# Implications for Economic Sovereignty

HOR warns that if this trend continues, the inevitable blending of digital assets and the real economy will lead to diminished usability and control of the won. In the United States and Europe, environments already allow for direct transactions using stablecoins through personal smart contracts linked to Visa, Mastercard, PayPal, Stripe, and Shopify. Such financial solutions, when adopted in South Korea, could leave the nation reliant on dollar-based stablecoins in a scenario devoid of won-denominated assets.

# The Case for Won-Based Stablecoins

To counter these challenges, HOR advocates for the introduction of won-based stablecoins. These would prevent the further integration of dollar-pegged stablecoins in the fintech, payment, and asset management sectors, thus bolstering the competitiveness of Korea’s digital asset market as a whole. HOR argues that giving global investors direct access to won-based digital assets would mitigate market anomalies, such as the ‘Kimchi Premium,’ and dissuade unnecessary capital outflows, thereby sustaining the dominance of the won in the digital finance landscape.

# Regulatory Roadmap

HOR highlights the importance of preparing legislative frameworks for won-based stablecoins, similar to efforts made by key nations including the United States, EU, UK, Singapore, and Hong Kong. Kim Yong-bum, CEO of HOR, emphasized, “Stablecoins are attracting considerable attention in various domains. Nations like the U.S., Europe, and Japan are prioritizing the institutionalization and legislation of stablecoins. South Korea must also engage in systemic, policy-driven contemplation and research to maintain the won’s competitive edge.”

This comprehensive report was a collaborative effort by Hashed Open Research and Populus, featuring contributions from Kim Hyo-bong, a lawyer at BAE, Kim & Lee LLC.