Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
ANALYSIS With money flowing into stablecoins, can Korea preserve currency sovereignty?
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By Lee Yeon-woo
Debate intensifies over launching Korean won-pegged stablecoin
It looked no different from a traditional payment. A clerk scanned the barcode of a product and asked the customer to pay. A man in his 30s, surnamed Choi, tapped his phone, and it was done.
"It was that simple? I expected something more special," Choi said.
But the process was, in fact, special. Choi paid using a stablecoin called Tether instead of Korean won, with a card issued by RedotPay.
Headquartered in Hong Kong, the card allows users to deposit stablecoins and use them freely around the world. It can be linked to Apple Pay or Google Pay, and with a physical card, users can make payments through the VISA network, everywhere from major supermarkets to small retail stores in Korea.
Some might call it a Ponzi scheme, worthless or too volatile, but crypto skeptics now face a fresh challenge from the industry: stablecoins.
Designed to minimize price volatility by pegging their value to safe assets like the U.S. dollar or government bonds, stablecoins offer instant transfers 24/7, with cross-border transaction and withdrawal fees close to zero.
Users can simply purchase stablecoins — mostly Tether (USDT) or USDC — at one exchange, transfer them to wallets on other exchanges in the other country and sell them for local currency. Compared to traditional international bank transfers, which could take two to three days and charge significant fees, stablecoins represent nothing short of a revolution.
Choi, a man in his 30s, pays with RedotPay at a CJ Olive Young branch in Seoul, Monday. A 1,400-won purchase was settled with 1.04 USDT. Korea Times photo by Lee Yeon-woo
Korea is part of this accelerating global trend. From November 2024 to March, an estimated 93.1 trillion won ($65.8 billion) worth of stablecoins flowed in and out of the country. The actual volume is likely higher, as off-exchange transactions are not captured in the data.
Now, the impact is beginning to spill into the real economy.
At the Namdaemun clothing wholesale market in Seoul, a cash withdrawal machine allows users to receive Korean won by transferring virtual assets like Bitcoin or Tether. A money exchange company, operating under a special government exemption, currently runs the service for foreign nationals.
A growing number of small-scale traders and individual business owners are reportedly using personal crypto wallets to settle import and export payments with stablecoins.
"The cost efficiency of stablecoin-based payment systems offers a significant advantage, especially for low-margin businesses such as restaurants and retail stores, as well as companies engaged in frequent international transactions," said Byun Joo-woong, a researcher at Four Pillars.
The floodgates have opened, but the government remains unprepared. Large sums of money are now moving across borders and being used for everyday transactions such as payments and remittances — yet it remains nearly impossible to track the true scale of activity.
A cash withdrawal machine that allows foreign nationals to exchange virtual assets for Korean won is seen at Namdaemun, Seoul, Tuesday. Korea Times photo by Lee Yeon-woo
Unregulated markets are thriving, with illegal currency exchanges booming in areas such as Gangnam, Myeong-dong and even online.
Searching for USDT or Tether on KakaoTalk reveals hundreds of anonymous chatrooms where individuals buy and sell the stablecoin at prices 1–3 percent higher than on official exchanges. Some groups even promote its use or redemption at specific overseas casinos.
"In the absence of legal regulations governing the issuance and circulation of stablecoins, substantial purchases of U.S. dollars are being conducted through stablecoin transactions — entirely outside the scope of official foreign exchange statistics," said Kim Yong-beom, CEO of Hashed Open Research and former first vice minister of economy and finance.
"This situation poses potential risks to the stability of Korea’s financial system and foreign exchange policy, underscoring the urgent need for a clear legal and institutional framework," Kim added.
In response, the government is reportedly preparing to revise the Foreign Exchange Transactions Act to include clear definitions for virtual assets and virtual asset service providers.
Korean-won pegged stablecoin?
Some industry experts argue that Korea should go further and issue its own stablecoin pegged to the Korean won.
One of the driving concerns is U.S. policy. The current trend shows no signs of slowing, with the Trump administration actively supporting dollar-backed stablecoins to reinforce the dollar’s global dominance. If their usage becomes more widespread in Korea, some fear it could threaten the sovereignty of the Korean won.
Bundles of cash are stacked at the Bank of Korea headquarters in Seoul on Jan. 14, ready to be distributed to commercial banks. Joint Press Corps
Adding to the pressure are global players looking to expand into Korea.
Tether recently posted a job listing for a manager tasked with exploring new business opportunities and assessing the local regulatory environment.
Crypto.com, meanwhile, signed a strategic agreement with domestic payment provider KSNET on Wednesday to enable foreign travelers to make in-store payments in Korea using virtual assets.
Since the emergence of stablecoins, the debate in Korea has never been more intense — with the political sphere now getting involved.
Lee Jae-myung, the Democratic Party of Korea’s presidential candidate, voiced support for stablecoins in a YouTube appearance, while Lee Jun-seok, a candidate of the minor conservative Reform Party, slammed the idea as a mere slogan rather than a policy, criticizing it for lacking a clear strategy.
Macroeconomic circles are also increasingly concerned about how this new system should be approached.
"Permitting the issuance of stablecoins could lead to a significant expansion of the money supply, with potentially serious side effects," warned Shin Bo-sung, a senior research fellow at the Korea Capital Market Institute. "This is a natural consequence of granting the private sector the privilege of currency creation."
"While embracing technological change through institutional frameworks is important, it is equally critical not to overlook the underlying economic principles and potential risks," Shin added.
The Bank of Korea also stated that the central bank must first examine whether to allow the issuance of a Korean won–denominated local stablecoin due to its functions as a potential substitute for traditional currency.
Still, many agree that if this trend is unstoppable, Korea’s focus should shift from resistance to adaptation. Kim said, "If Korea doesn't shape the order, it will be shaped by it. The time has come to decide what kind of order we will design within our domestic exchanges."