In a significant development, South Korea’s financial institution is visibly enhancing its involvement in the realm of digital currencies. Reports indicate that the Bank of Korea (BOK) has established a dedicated unit titled “Digital Currency Lab” within its Financial Settlement Bureau.
This innovative department is tasked with scrutinizing digital assets, particularly focusing on won-linked stablecoins and the regulatory frameworks surrounding them. Furthermore, the bank plans to rebrand its current Digital Currency Research Lab to the Digital Currency Lab, effective July 31, 2025, and is reallocating personnel to conduct thorough assessments of various tokens.
Structure of the Crypto Division
Sources indicate that the newly formed division will closely monitor price fluctuations, market dynamics, and regulatory changes. This division will function alongside existing departments within the Financial Settlement Bureau.
The personnel will investigate the applications of tokens in payment and settlement processes, as well as their impacts on traditional banking systems and loan provisions. This initiative aims to identify potential risks early and provide informed recommendations to lawmakers.
Movement on Stablecoin Legislation
The establishment of this unit comes immediately after South Korea’s leading political factions proposed new legislation targeting stablecoins. Each draft bill aims to empower the Financial Services Commission with extensive authority to regulate and oversee issuers.
Proponents of the legislation argue that it will safeguard consumers while fostering innovation in the sector. However, critics express concerns that it may undermine the BOK’s control over monetary policy.
According to reports, some analysts caution that allowing the free circulation of private stablecoins could disrupt interest rate management.
Pause on CBDC Initiatives
In late June, the BOK decided to pause its central bank digital currency (CBDC) initiative, referred to as Project Han River. Governor Rhee Chang-yong noted that deposit tokens from banks bear similarities to stablecoins.
He remarked that “regardless of whether we discuss a won stablecoin or a deposit token, we will necessitate a digital currency in the future.”
The governor further mentioned that the bank will compare a bank-led approach against one that includes broader participation from the private sector. Initially, the focus will be on garnering support from banks, followed by a possible engagement with fintech entities.
Interest from Technology Giants
Prominent tech companies in South Korea have already taken steps to secure trademarks for their own won-pegged cryptocurrencies, seemingly awaiting legislative approval. Should these bills be enacted, leading figures in e-commerce and messaging could soon unveil their own digital tokens.
This shift may introduce novel payment methods and customer loyalty initiatives while prompting withdrawals from traditional banking institutions—an issue that the BOK has expressed concern over.
Deputy Governor Ryoo Sang-dai has highlighted the need for a cautious strategy, indicating that the rollout of digital tokens will occur in phases, starting with commercial banks. The cryptocurrency division is expected to be instrumental in guiding this approach.
Featured image courtesy of Meta, graph provided by TradingView
