The Bank of Korea (BOK) has proposed stringent new regulations for issuers of won-based stablecoins, suggesting they may be required to deposit their reserve assets directly at the central bank. This proposal was submitted to the National Assembly’s finance committee on October 1, ahead of the government’s expected release of its first draft bill on stablecoins this month.
Stricter Controls and Risk Mitigation
The BOK’s primary motivation for the mandatory deposit requirement is to mitigate risks associated with the rapid growth of private stablecoins outside of its control:
- Containing Money Supply: The measure would reduce the risks linked to sudden redemption surges and uncontrolled money supply growth.
- Limiting Profits (Seigniorage): The central bank noted that issuers currently profit significantly by investing reserves in higher-yielding, risk-free assets (like government bonds). Redirecting these reserves into central bank deposits would cap issuer earnings at the policy rate level, addressing the issue of private issuers exploiting seigniorage-like profits.
- Systemic Confidence: Requiring deposits at the central bank would more closely align stablecoins with the traditional payment system, ensuring redemption certainty and building user confidence against mass redemptions ("coin runs").
Full Reserve Requirements and Issuance Restrictions
In addition to the central bank deposit, the BOK outlined two other major regulatory demands:
- Full Reserve Model: The BOK strongly backed a 100% full reserve model, requiring issuers to hold reserves fully backed by safe assets, similar to the rules for prepaid payment instruments.
- Initial Issuance by Banks: The central bank proposed that, due to risks like regulatory arbitrage, initial issuance should be limited to consortia led by banks with strong compliance capacity, with expansion to non-bank players considered only later.
The BOK acknowledged that these measures could reduce the profitability of stablecoin issuance in Korea and discourage non-bank participation. However, it argued that the trade-off is necessary to ensure greater financial stability and stronger safeguards.
The government’s official legislative draft is anticipated to be released by the Financial Services Commission (FSC) in October, marking a critical moment in South Korea’s approach to global stablecoin regulation.
October 2025, Cryptoniteuae