South Korea will implement stable currency foreign exchange controls and introduce a stable currency bill based on the precedent of the European Union and Japan

According to local media reports, the South Korean government has begun planning to implement foreign exchange controls on stablecoins. The move comes in response to the increasing use of stablecoins using blockchain technology, especially those pegged to the U.S. dollar, in trading activities.

These digital currencies are increasingly used in international trade and fall outside traditional regulatory frameworks. The country’s government’s actions have shown that cryptocurrencies actually have a place in the country.

Stable currency supervision becomes the focus of Korean supervision

South Korea aims to mitigate risks that may arise when stablecoins expand their functionality as payment instruments beyond the cryptocurrency ecosystem. In the cryptocurrency ecosystem, stablecoins primarily serve as a medium of exchange.

The country’s regulator, the Financial Services Commission (FSC), announced that stablecoin regulation will be a focus of the second phase of the Virtual Asset User Protection Act. This phase will refer to regulations in other regions, such as the European Union and Japan, which have already implemented stablecoin-related laws.

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Critics point out that the government has been unable to address the increasing use of stablecoins in trade, leading to regulatory loopholes. There are concerns that unregulated financial flows could pose a potential threat to monetary sovereignty and the broader financial system.

Tether has nearly $100 billion in U.S. debt as asset reserves, ranking 18th among countries with U.S. Treasury debt. And purchases of 3-month U.S. Treasuries ranked third, behind only the United Kingdom and the Cayman Islands. We previously reported that Tether officially stated that it has the potential to become the largest buyer of short-term U.S. debt next year.

Learning from the EU and Japan, South Korea will also introduce a stable currency bill?

Contrary to South Korea's incremental approach, both the EU and Japan have been quick to unveil regulatory frameworks. The EU’s MiCA allows financial institutions to issue stablecoins, while Japan recognizes stablecoins as payment modes and requires large transactions to comply with foreign exchange reporting rules.

Reports indicate that the South Korean government is also considering enacting laws to regulate the issuance of stablecoins linked to the Korean won. The government is also expected to relax restrictions on companies holding crypto accounts, a regulation that has been criticized by local industry players.