- Financial institution of Korea requests bank-only issuance of won-backed stablecoin
- The Financial institution of Korea has mentioned monetary establishments ought to maintain sufficient money to course of redemptions.
- Regulators would require stablecoin issuers to be majority-owned by a bank-led consortium.
South Korea’s central financial institution, the Financial institution of Korea (BOK), requires solely licensed business banks to problem won-backed stablecoins. In a advice despatched to lawmakers on February 23, the financial institution warned that permitting others to take action may enhance the chance of cash laundering, intervene with financial coverage and threaten monetary stability.
The decision got here because the nation finalizes the Digital Asset Primary Legislation, the rulebook for cryptocurrencies.
The Financial institution of Korea has mentioned that gained stablecoins ought to solely be issued by establishments with robust supervision and a stable compliance system. Moreover, you have to have ample money out there to cowl redemptions.
Officers warned that permitting fintech and crypto corporations to problem cash may weaken central banks’ management over the forex and introduce new dangers to the funds system.
Anti-money laundering (AML) was additionally talked about as a serious problem. It has been identified that stablecoins facilitate the speedy motion of funds throughout borders and could be exploited with out bank-level checks.
Limiting issuance to licensed banks would be certain that capital and liquidity requirements are met. This additionally ensures that AML safeguards are literally enforced.
South Korea’s subsequent Digital Asset Primary Legislation will set up licensing guidelines, mandate full reserves, and impose strict oversight on stablecoin issuers, making it one of many nation’s most full cryptocurrency rules so far.
The decision for stricter guidelines follows a collection of high-profile cryptocurrency incidents in South Korea, together with the current ghost Bitcoin switch error on Bithumb, and has put stress on authorities to tighten oversight.
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South Korea’s Monetary Providers Fee is anxious that changing into too strict may stifle fintech innovation and damage the competitiveness of home corporations. In the meantime, the Financial institution of Korea is specializing in monetary stability and system safety.
South Korean authorities are due to this fact contemplating a center floor, requiring stablecoin issuers to be majority-owned by a bank-led consortium. On this manner, banks will proceed to manage how their stablecoins are issued and the way their reserves are managed.
The present proposal is for banks to personal a minimum of 51% of stablecoin issuers. The proposed guidelines would additionally mandate 100% reserve backing with protected property resembling financial institution deposits and authorities bonds, permitting customers to redeem at full value at any time.
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