New BOK governor pledges 'flexible' monetary policy amid Middle East risks

Shin Hyun-song, the new Bank of Korea (BOK) governor, delivers an address during an appointment ceremony at the BOK annex in Seoul, Tuesday. Joint Press Corps

Shin Hyun-song, the newly appointed governor of the Bank of Korea (BOK), vowed Tuesday to adopt a “prudent yet flexible” approach to safeguard both price and financial stability amid growing uncertainties stemming from the conflict in the Middle East.

Shin, who succeeded outgoing Gov. Rhee Chang-yong, made the remarks during a ceremony for his appointment at the central bank annex earlier in the day.

He highlighted the dual pressures facing the economy, noting that a surge in global oil prices triggered by the Middle East conflict is simultaneously fueling inflation while weighing on growth.

“Market volatility and the risk of mounting financial imbalances also persist,” he said, identifying flexible policy management as a key priority for his four-year term.

Shin described the current global economic landscape as being in the middle of a “great transition,” driven by geopolitical risks and the rapid advancement of artificial intelligence (AI). He emphasized that AI has already transformed industries and is expected to continue reshaping growth patterns, productivity and labor markets.

Turning to the domestic economy, Shin expressed concern about weakening growth drivers, citing structural headwinds such as demographic changes, rising inequality and ongoing challenges in the real estate sector and in household debt.

“These domestic issues are intersecting with global shifts in complex and uncertain ways,” he said.

Shin said it is necessary to reassess the role of central banks, stressing that the evolution of central banking has been driven more by real-world experience than by theory. Central banks gained prominence in managing inflation and growth after the Great Depression of the 1930s and the stagflation of the 1970s, later emphasizing financial stability following the global financial crisis of the late 2000s.

He then outlined four priorities for the BOK — flexible monetary policy, stronger financial stability framework, digital financial innovation alongside the Korean won’s internationalization and a greater role in structural economic reform.

Expressing a stronger commitment to internationalizing the won, he vowed to work closely with the government to introduce 24-hour foreign exchange trading and develop offshore settlement systems.

In addition, he pledged to expand the role of central bank digital currencies (CBDCs) and deposit tokens.

During his parliamentary confirmation hearing on April 15, he adopted a more flexible stance, suggesting that CBDCs and private stablecoins could coexist.

This stance marks a departure from his previous position. While serving as head of the Monetary and Economic Department at the Bank for International Settlements, Shin had been a vocal skeptic of stablecoins, warning of risks such as financial contagion and capital outflows from non-reserve currency economies.

His shift is likely to accelerate discussions on long-delayed digital asset legislation, including the proposed Digital Asset Basic Act.

The ruling Democratic Party of Korea, which supports the introduction of won-based stablecoins as a key campaign pledge of President Lee Jae Myung, has welcomed the change and is preparing to introduce the relevant bill.