The Bank of Korea Considers Linking Deposit Tokens to Public Blockchain
The Bank of Korea is exploring the possibility of connecting its deposit tokens to a public blockchain, a move that could place its state-backed digital currency in alignment with private-sector stablecoins operating on open networks.
Stablecoin Integration
The tokens being considered would be a form of stablecoin issued within the digital currency system established and maintained by the Bank of Korea, as confirmed by the bank’s Deputy Governor Lee Jong-ryeol. This integration is part of a larger vision to have these stablecoins coexist within the digital currency ecosystem alongside stablecoins issued by private entities.
Speaking at the 8th Blockchain Leaders Club event in Seoul, Lee emphasized that this initiative is being driven from a national perspective and falls within the Bank of Korea’s mandate as a monetary and foreign exchange authority.
Hybrid System Concerns
While the proposal has sparked interest, there are concerns about how a hybrid model combining tokenized deposits with private-sector stablecoins would operate across different jurisdictions. Some experts question whether this approach truly safeguards monetary sovereignty.
Peter Chung, head of research at Presto Labs, pointed out that stablecoins on public blockchains have the ability to transcend borders, and that protecting monetary sovereignty requires more than just tweaking token design or network architecture—it involves implementing sound monetary and fiscal policies.
Global Stablecoin Impact
Deputy Governor Lee also expressed apprehension about the growing use of global stablecoins in South Korea, citing potential threats to monetary sovereignty, policy controls, financial stability, and anti-money laundering efforts. The influx of stablecoins in the country has raised red flags, with billions of dollars’ worth of digital assets being transferred abroad, a significant portion of which was in stablecoins like USDT and USDC.
Preserving Capital and Stability
Efforts to address these concerns are underway, with political leaders in South Korea exploring the idea of launching a won-backed stablecoin to reduce capital outflows and reliance on dollar-denominated tokens. The Bank of Korea is also involved in the Agora Project, a cross-border settlement system with central banks from seven countries aimed at enhancing financial stability and regulatory oversight.
Global Stablecoin Trends
Globally, the use of stablecoins continues to rise, with the total market cap now exceeding $249.6 billion. This growth underscores the increasing importance of stablecoins in the digital economy and the need for effective regulation and oversight.
As discussions around the integration of deposit tokens into a public blockchain continue, the Bank of Korea and other stakeholders will need to navigate the complexities of this evolving landscape to ensure the stability and integrity of the financial system.
Edited by Stacy Elliott.