By Cynthia Kim and Jihoon Lee

SEOUL (Reuters) – South Korea’s central bank governor, Rhee Chang-yong, expressed openness to issuing won-denominated stablecoins but raised concerns about managing capital flows.

> “Issuing won-based stablecoin could make it easier to exchange them with dollar stablecoin rather than working to reduce use of dollar stablecoin. That in turn could increase demand for dollar stablecoin and make it difficult for us to manage forex,” Rhee stated at a press conference in Seoul.

Stablecoins are cryptocurrencies designed to maintain a stable value, often pegged 1:1 to the U.S. dollar. They are commonly used by crypto traders for transferring funds and are increasingly adopted by various companies.

Globally, regulators remain cautious about cryptocurrencies, viewing them as speculative and potential threats to national currencies.

Rhee’s remarks align with the initiatives of South Korea’s left-leaning President, Lee Jae Myung, who aims to fulfill his election promise by allowing companies to issue won-based stablecoins.

Earlier this month, the ruling Democratic Party proposed the Digital Asset Basic Act, aimed at establishing a regulatory framework for local companies to issue won-denominated stablecoins.

President Lee appointed Kim Yong-beom, a former crypto firm executive, as his chief policy officer, enhancing speculation regarding government actions supporting stablecoin issuance backed by the Korean won.

Kim previously served as the vice chairman of the Financial Services Commission and was the chief executive of Hashed Open Research, linked to the crypto venture capital firm Hashed Ventures Inc.

Governor Rhee has cautioned that enabling stablecoin issuance by local companies rather than the central bank could significantly impair monetary policy effectiveness and control over capital flows.