Hashed advocates for regulatory structure to foster expansion of KRW stablecoins

A new study implies that stablecoins should be viewed and controlled as both payment mechanisms and investment assets.

A stablecoin linked to the South Korean won might enhance South Korea's position in the global stablecoin competition, according to a research published by the think tank Hashed Open Research and Four Pillars.

The study, released on March 24, argues that releasing a won-based stablecoin might increase the currency's utility for digital transactions and serve as a bridge between South Korea's cryptocurrency market and foreign digital asset ecosystems.

According to the study, the introduction of a KRW stablecoin "could address structural inefficiencies in the Korean crypto market," as well as "serve as the foundation for various fintech industries that emerge from this ecosystem." Hashed Open Research notes that the high liquidity of Korean exchanges could give a KRW stablecoin an advantage over alternatives like the yen or euro.

While promoting the use of won-pegged stablecoins, the report also expresses concerns about the rapid growth of dollar-based stablecoins, such as Tether (USDT) and USD Coin (USDC), which could be increasing capital outflows from the country. The report warns that capital outflows from Korea's crypto market could become a larger issue, potentially undermining the country's financial stability and the won's strength.

Hashed Open Research urges for a specific regulatory framework for stablecoins in the report, claiming that these assets "possess characteristics of both payment instruments and investment assets, requiring a dedicated regulatory framework." The report suggests that both banks and non-banks be permitted to issue stablecoins under stringent licensing and security requirements.

Furthermore, it advises that foreign-issued KRW stablecoins be regulated domestically, while foreign stablecoins tied to other fiat currencies be permitted only if they meet comparable regulatory standards.