The South Korean Budget Office released specific figures for the Won stablecoin
DBS and Citi's New York office have completed a cross-border payment transaction in US dollars, using encrypted deposits on Swift's Digital Ledger.
9/8/20264 min read
Why is the difference so large?
The gap between $275 million and $3.8 billion is approximately fourteen times, which is quite unusual for a government financial estimate and reflects genuine uncertainty about the two variables rather than a lack of accuracy in the analysis.
The first variable is the level of adoption. The lowest estimate assumes only a small fraction of card transaction volume will switch to stablecoins, which would occur if retailers find the operational complexity of accepting stablecoin payments outweighs the fee savings, or if consumers see no reason to change their payment habits. The highest estimate assumes a significant conversion, which would require both a robust retailer payment acceptance infrastructure and a willingness among consumers to hold and spend stablecoins instead of cards.
The second variable is the fee structure that stablecoin systems actually charge in practice. The figure of 0.1 to 0.3 percent represents the theoretical cost of payments on the blockchain, but in reality, stablecoin payment systems will add other costs: entry and exit fees, custody fees, compliance fees, and any profit margins that payment service providers building the infrastructure accept. Whether merchants earn the full 1.4% to 0.2% spread or only a significantly smaller portion depends on the level of competition in that intermediary layer.
The origin of this estimate is noteworthy. It comes from a parliamentary body tasked with evaluating financial and economic proposals, rather than from a stablecoin issuer or a product marketing industry association, which gives the figures a different evidential weight compared to similar forecasts from commercially interested parties.
Three Risks the Budget Office Has Warning About
The warning about credit intermediation refers to the mechanism banks use to finance their lending activities. Banks take deposits and lend based on them, with the difference between the deposit interest rate and the lending interest rate financing the bank's operations. If a significant portion of transaction balances shift from bank deposits to stablecoins, the deposit base financing lending will shrink, potentially reducing access to credit or increasing credit costs. This concern is structurally identical to the arguments central banks worldwide have made about CBDCs and stablecoins, and that is why the Bank of Korea has taken its current stance on issuer control.
The risk warning regarding the exchange rate collapse describes a specific failure mode. The stablecoin issuer holding reserve assets faces withdrawal demands during periods of stress, and meeting large-scale withdrawal requests requires liquidating the reserves. If withdrawal requests come in faster than the rate of reserve sales at par, the issuer either fails to meet the withdrawal requests or sells the assets at a loss, both of which disrupt the fixed 1:1 exchange rate and can trigger a spiral of confidence that accelerates the wave of withdrawals. It is this mechanism that destroyed Terra's UST in 2022, even though the fiat-backed collateral structure that a won-denominated stablecoin would utilize is significantly more robust than Terra's algorithmic design.
The regulatory recommendations stem from these two risks: reserve requirements ensure issuers hold sufficient liquid assets relative to the number of tokens in circulation, stablecoin reward limits prevent issuers from competing with bank deposits on yields in a way that accelerates deposit withdrawals, and tighter oversight of tokens whose scale makes them systemically important.
The recommendation on yield limits helps South Korea align with international consensus formed in the GENIUS Act, MiCA, and Singapore's September 1 consultation, all of which prohibit or restrict interest payments on payment stablecoins on the grounds that a yield-generating stablecoin operates economically as a deposit or investment product and should be appropriately regulated.
Dispute between the Bank of Korea and the Financial Services Commission
The unresolved institutional issue determining whether won-denominated stablecoins will transition from policy concept to market reality is who has the authority to issue them. The Bank of Korea favors bank-controlled issuance, a stance consistent with concerns about credit intermediation and with the central bank's general preference for keeping monetary instruments within regulated banking spheres, where the central bank has direct oversight.
The Financial Services Commission argued in favor of broader participation on an innovation basis, a stance that would allow fintech companies, payment companies, and potentially even non-bank technology companies to issue won-denominated stablecoins under an authorization framework instead of restricting issuance only to licensed banks.
The dispute is not simply a bureaucratic issue. Issuance solely by banks would create a won-denominated stablecoin market similar to tokenized deposits, with these instruments acting as digital claims to bank money within current regulatory frameworks, and concerns about credit intermediation largely neutralized because deposits never leave the banking system. Wider issuance would create a market resembling a dollar-denominated stablecoin ecosystem, with non-bank issuers holding reserves outside the banking system and the potential for massive withdrawals as the Budget Office has warned.
Assessment and Conclusion
Until the Basic Law on Digital Assets resolves the dispute between the Bank of Korea and the Financial Supervisory Commission (FSC) regarding who has the right to issue them, won-denominated stablecoins remain a policy concept rather than a real market. The Budget Office's savings estimates provide lawmakers with a concrete figure to weigh against the structural risks highlighted in similar reports—a function of a parliamentary budget office.
The broader test posed by the South Korean case is whether the utility of stablecoins extends beyond the dollar ecosystem that has shaped the sector. The $312.3 billion global market is almost entirely priced in dollars, as the dollar's role in international trade and finance gives dollar-denominated stablecoins a network effect that no other cryptocurrency can replicate. A serious government-backed effort toward a won-denominated stablecoin, with a domestic payment use case generating significant savings for merchants and an institutional payment use case tied to a 2027 tokenized stock market, would test whether a non-dollar stablecoin could achieve sufficient domestic utility to make a difference regardless of its irrelevant nature to international flows.
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Compiled and analyzed by HCCVenture
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