Stablecoin scramble stirs market volatility, draws regulatory warnings
More Korean banks are racing to take a preemptive lead in stablecoins, with the push spilling into equity markets and triggering heightened regulatory warnings amid growing volatility.
The frenzy reflects a broader shift as financial and tech players vie for dominance in the future of digital payments.
KB Kookmin Bank, Hana Bank and internet-only Kakao Bank each filed trademark applications this week related to stablecoins, according to the Korean Intellectual Property Office.
KB Kookmin led the move, applying for 32 trademarks including “KBKRW” and “KRWKB,” classified under cryptocurrency-based transfers and financial services. Hana Bank followed with 16 applications, such as “HanaKRW” and “KRWHana.” Kakao Bank, the first internet-only lender to join the stablecoin race, filed for 12 cryptocurrency-related trademarks.
Banks are accelerating Korea’s stablecoin race, which kicked off last week when Kakao Pay, the payments arm of tech giant Kakao, filed for 18 trademark rights.
In the non-financial sector, game developer Nexus has also entered the fray, registering a won-based stablecoin, “KRWx,” on the Binance blockchain (BNB Chain) and filing for a corresponding trademark in Korea.
Momentum behind won-pegged stablecoins has been building in recent weeks, with the new administration signaling support for institutionalization.
The ruling Democratic Party of Korea is backing legislation that would allow not only banks but also non-bank institutions to issue won-based stablecoins, provided they meet capital requirements such as at least 500 million won ($368,000) in equity or 1 billion won in total assets.
The frenzy has jolted equity markets, sending crypto-related stocks soaring. Kakao Pay, seen as a front-runner in the stablecoin push, has surged 148 percent in June alone. The Korea Exchange halted trading in the stock on Tuesday after labeling it an “investment risk” due to excessive volatility.
Despite regulatory warnings, shares rose nearly 2 percent on Wednesday — well above the Kospi’s 0.15 percent gain — briefly topping 100,000 won, prompting a second trading suspension on Thursday.
Amid the crypto surge, regulators are urging caution. In a report Wednesday, the Bank of Korea warned that hasty adoption of stablecoins could trigger systemic instability.
“Stablecoins operating on blockchain networks carry payment and operational risks due to insufficient regulatory frameworks and infrastructure, including the potential for technical failures and criminal misuse,” the BOK said in the report, adding that key concerns include coin runs, capital flow volatility and reduced effectiveness of monetary policy.
The central bank’s warning cooled investor sentiment, sending stablecoin-linked stocks tumbling.
Kakao Bank, which touched a three-year high of 38,000 won on Tuesday, traded around 31,600 won by Friday afternoon, down 13 percent on the day. LG CNS and Shinsegae I&C, both of which had surged 94 percent and 80 percent, respectively, in June on stablecoin anticipations, also tumbled, sliding nearly 20 percent over Wednesday and Thursday.
jwc@heraldcorp.com