South Korea is considering allowing domestic institutions to issue virtual assets, while stablecoins remain controversial

Li Changyong stated at the Asian Financial Forum in Hong Kong that, in light of market pressures, South Korean authorities have allowed domestic residents to invest in virtual assets issued overseas. The financial regulatory department is considering establishing a new registration system to allow domestic institutions to issue virtual assets.

Li Changyong pointed out that if a won-denominated stablecoin is launched, its main use may focus on cross-border transactions, while tokenized deposits are more suitable for domestic payment scenarios. However, he emphasized that there is still considerable controversy surrounding stablecoins. The core concern is whether the won stablecoin could be used to circumvent capital flow management, especially when used in conjunction with dollar stablecoins.

He further stated that dollar stablecoins have a wide range of applications and low entry barriers, with related transaction costs significantly lower than directly using dollars. When exchange rate fluctuations trigger changes in market expectations, funds may quickly flow into dollar stablecoins, causing large-scale capital transfers; at the same time, the participation of numerous non-bank institutions in stablecoin issuance also significantly increases regulatory difficulties.

In addition, Li Changyong noted that South Korea itself has a highly developed fast payment system, so the advantages of retail central bank digital currency (CBDC) are limited. Currently, the central bank is advancing tokenized deposits and wholesale CBDC through multiple pilot projects to maintain the existing dual financial system.