SEOUL: South Korea should consider integrating bitcoin into its national reserves and issuing a won-backed stablecoin, financial experts and industry leaders said at a forum on Thursday (March 6).
At the seminar, hosted at the National Assembly by the main opposition Democratic Party, the CEO of blockchain firm xCrypton, Kim Jong-seung, stressed the need for a strategic response if the US moves to create a “national strategic reserve of cryptocurrencies,” as announced by President Donald Trump. Trump is widely expected to unveil a related plan at the White House Crypto Summit on Friday.
“If the US moves toward holding bitcoin as part of its reserves, South Korea will need to respond with a clear policy,” Kim said.
Thursday’s discussion comes amid growing global momentum toward cryptocurrency adoption, spurred by the US push. Countries like Switzerland and Japan have already taken significant steps in this direction. Switzerland’s “Crypto Valley” in Zug has become a global hub for blockchain startups and crypto finance, while Japan legalised yen-backed stablecoins in 2023.
Kim Min-seok, who leads the Democratic Party’s policy preparation committee for a potential snap presidential election, indicated that his party would reshape the country’s nascent crypto policy should it come to power. South Korea could hold an election in May, if President Yoon Suk Yeol’s impeachment is confirmed by the Constitutional Court.
Stressing that blockchain finance and virtual assets will play an increasingly significant role in economic strategy, Rep. Kim said, “It is essential to discuss virtual assets and blockchain finance.”
South Korea’s foreign exchange reserves, used to stabilise national currencies and manage economic shocks, currently consist of traditional assets like US dollars, gold and government bonds.
Experts at Thursday’s forum said the country should look beyond stockpiling bitcoin and explore the possibility of issuing a won-backed stablecoin.
Kim, the CEO of xCrypton and formerly a Web3 business development director at SK Telecom, warned of the risks of failing to develop a won-backed stablecoin. He argued that if US dollar-pegged stablecoins dominate the digital economy without a comparable South Korean alternative, the country could lose “monetary sovereignty,” limiting its control over domestic and international financial transactions.
Stablecoins, unlike bitcoin, are designed to maintain a fixed value by being pegged to traditional currencies or assets such as government bonds, providing a stable medium for financial transactions. Without a domestic stablecoin, Kim said, South Korea risks excessive dependence on US dollar-backed digital currencies, potentially weakening its financial influence in global markets.
“We need to develop a model linking dollar stablecoins and won stablecoins for trade transactions,” he said.
Economics professor Seo Eun-sook of Sangmyung University emphasised the urgency of aligning South Korea’s financial policies with global trends, noting that “major economies like the US and the European Union are already working toward stablecoin-based international payment systems.”
Business management professor Kang Hyoung-goo of Hanyang University proposed a stablecoin backed by South Korean government bonds, arguing that such an initiative could enhance financial stability and credibility.
According to Kang, one of the main hurdles preventing South Korea from joining the MSCI Developed Markets Index – a classification that would attract more foreign investment – is the absence of an offshore won market. A government-backed stablecoin could help address this issue by making won-denominated assets more accessible internationally.
“A government bond-backed stablecoin could also help distribute South Korea’s long-term government bonds worldwide,” Kang said.
Beyond stablecoin development, regulatory barriers in South Korea’s crypto sector were also a key topic of discussion. Strict regulations currently prevent non-residents from trading on South Korean cryptocurrency exchanges, pushing domestic traders to offshore platforms like Binance.
“In May 2023, about 13 per cent of Binance’s total trading volume came from South Korean traders,” said Cho Jung-hee, managing attorney at D.Code Law Group, calling the outflow of domestic capital a significant concern. – The Korea Herald/ANN