Active retail investor engagement powers Korea to become rule setter in global digital finance: blockchain expert
John Park, head of Korea at Arbitrum / Corutesy of Arbitrum
A law proposed by Rep. Min Byoung-dug of the ruling Democratic Party of Korea on the issuance of won-based stablecoins marks Seoul's boldest financial-technology overhaul since broadband first reached every Korean household in the late 1990s.
That's according to John Park, head of Korea at Arbitrum, a blockchain infrastructure builder and digital asset manager, who believes that this will help the discipline of money-market funds while still allowing private innovation.
“The proposed licensing regime for stablecoin issuers, combined with asset segregation requirements and enhanced disclosure standard, signals a mature regulatory approach. Unlike blanket restrictions seen elsewhere, Korea appears to be building infrastructure that could attract institutional capital while maintaining prudential oversight,” he said in an interview with The Korea Times.
By pairing these safeguards with a clear licensing path, regulators may invite global institutions to build here without sacrificing prudential oversight.
Park believes this shift in regulatory credibility, more than tax breaks or marketing, could elevate Korea from just a regional player to a global leader, setting the rules for digital finance.
Yet other influential voices argue that only banks should be authorized to issue won-based stablecoins, opposing widespread permission for other kinds of financial companies to do so.
Market watchers with extensive understanding of the Korean capital market say this is a crucial prerequisite and a vital precautionary step, arguing it's necessary to verify that won-based stablecoins will be viable when issued, as President Lee Jae Myung described in a major campaign pledge.
Retail investor enthusiasm
Korea’s singular advantage is genuine retail scale, Park said.
About one‑third of adults already trade digital assets and Korean exchanges regularly account for a double‑digit share of global spot volume. This native liquidity is something Singaporean and Hong Kong platforms still must import.
“A potential vulnerability appears to be institutional coordination,” he said. “From public reporting, it seems the Financial Services Commission (FSC) views stablecoins as market instruments under its watch, while the Bank of Korea (BOK) has expressed concern about anything linked to the won in relation to monetary policy."
Park argues that more regulatory coordination between agencies could help large banks feel more confident about investing, and encourage foreign firms to consider moving key operations to Seoul.
“Overall, Korea has strong fundamentals for Web3 development and the regulatory framework appears designed to build on these strengths while addressing legitimate supervisory concerns.”
He believes the Korean won-based stablecoin ecosystem has strong potential, given Korea's advanced digital infrastructure and significant crypto adoption rates.
However, based on industry experience globally, a successful domestic stablecoin ecosystem would likely require some conditions to be met, he said. Among them is the need for the ecosystem to be integrated with Bank of Korea monetary policy rather than working against it, in his view.
“The BOK understandably fears that private stablecoins could blunt its policy tools. One potential solution could be a standing redemption window, supervised by the BOK, that allows rapid contraction of supply if stress emerges," he said.
"When a user can always convert one won-coin to one won in a regulated bank account, the incentive to run evaporates. With those structures in place, won-based coins could potentially become digital cash for e-commerce, DeFi (decentralized finance) and even regional trade settlement.”
Artificial Intelligence AI Neural Network Concept with Lines and Binary Code. 3D Render
Settlement, liquidity fragmentation risks
The issuance of won-based stablecoins could potentially bring settlement risk and monetary data back under Korean jurisdiction, he acknowledged, but the transition would likely not be painless.
“Liquidity may fragment in the short run as market-makers arbitrage between old and new pairs. Domestic issuers would likely bear higher compliance costs than offshore competitors, at least until scale economies kick in.”
The biggest challenge would be persuading exchanges and DeFi protocols built around dollar liquidity curves to add won pools, he added.
DeFi refers to financial applications built on blockchain technology that aim to recreate traditional financial services in a decentralized and transparent manner, often without intermediaries like banks.
“That said, the sovereignty dividend — direct oversight of systemically important payment rails and granular transaction data — could be significant enough over the long-term to justify the effort. However, this would ultimately depend on market adoption and regulatory implementation details.”