South Korea Central Bank Warns Stablecoins Could Complicate FX Controls

South Korea’s central bank chief warned that Korean won-denominated stablecoins could complicate capital flow management, adding a note of caution to an ongoing debate among lawmakers over whether and how domestic stablecoins should be issued, according to local reports.

Speaking at the Asian Financial Forum in Hong Kong, Bank of Korea Governor Lee Chang-yong said authorities are considering a new registration framework that would allow domestic institutions to issue virtual assets, according to a report by Radio Television Hong Kong. He cautioned, however, that stablecoins remain controversial because of their potential impact on foreign exchange stability.

Lee said won-pegged stablecoins would likely be used mainly for cross-border transactions. He warned that won stablecoins, combined with US dollar stablecoins, could be used to bypass capital flow management measures in periods of volatility. 

The remarks added the central bank’s perspective to the ongoing legislative standoff in South Korea, where policymakers are trying to formalize digital asset issuance without weakening financial oversight. While the country has signaled openness to regulated crypto activity, officials remain cautious about mechanisms that could undermine existing foreign exchange controls.