Stablecoins should be treated as both payment tools and investment assets, requiring a comprehensive regulatory framework, according to a new research report.

The Potential of a KRW-Based Stablecoin

A stablecoin tied to the Korean won could strengthen South Korea’s position in the global stablecoin market, as highlighted in a recent report by Hashed Open Research and Four Pillars. The report, published on March 24, suggests that launching a won-based stablecoin could enhance the practicality of the currency for digital transactions while bridging the gap between Korea’s crypto market and international digital asset ecosystems.

The introduction of a KRW stablecoin could address inefficiencies in the Korean crypto market and serve as a foundation for emerging fintech industries, according to the research. With South Korean exchanges known for high liquidity, a KRW stablecoin might have a competitive edge over alternatives like those pegged to the yen or euro.

Challenges with Dollar-Based Stablecoins

While the report emphasizes the benefits of won-pegged stablecoins, it also raises concerns about the growing dominance of dollar-based stablecoins, such as Tether (USDT) and USD Coin (USDC). The increasing use of these dollar-pegged assets could exacerbate capital outflows from South Korea, which may impact financial stability and the strength of the national currency.

Need for a Robust Regulatory Framework

The report calls for a comprehensive regulatory framework for stablecoins, noting that these assets exhibit characteristics of both payment instruments and investment assets. It suggests that stablecoins should be regulated under strict licensing and security requirements, allowing both banks and non-bank entities to issue them.

Furthermore, the report advocates for domestic regulation of foreign-issued KRW stablecoins to ensure compliance with local standards. It also recommends permitting foreign stablecoins pegged to other fiat currencies only if they meet equivalent regulatory requirements.

Key Takeaways for Investors and Enthusiasts

If South Korea moves forward with a KRW stablecoin, it could pave the way for greater innovation in the fintech space and strengthen the country’s position in the global cryptocurrency ecosystem. However, regulatory clarity will be critical to manage risks and ensure stability in the market.

“Stablecoins possess characteristics of both payment instruments and investment assets, requiring a dedicated regulatory framework.” – Hashed Open Research

As the cryptocurrency industry continues to evolve, understanding the implications of stablecoins—both their benefits and challenges—will be essential for investors and policymakers alike. Stay informed to make better decisions in this dynamic financial landscape.

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