In its financial stability report released Wednesday, the Bank of Korea cautioned that stablecoins — cryptocurrencies pegged to traditional currencies — are vulnerable to abrupt mass redemptions or “coin runs” if public confidence in their reserve assets or price stability erodes.
Such loss of trust could lead to "de-pegging" events, in which stablecoins detach from their fiat anchors, with potentially cascading effects on short-term funding markets and liquidity conditions at banks.
The central bank emphasized that unlike traditional financial institutions, stablecoin issuers lack safeguards such as deposit insurance or access to lender-of-last-resort functions.
The warning comes as South Korea presses forward with legislative reforms aimed at modernizing digital asset oversight — a key campaign pledge of President Lee Jae Myung. BOK Governor Rhee Chang-yong has repeatedly expressed concern that a premature or poorly regulated rollout could undermine monetary stability.
The report also cited operational vulnerabilities, pointing to the absence of robust blockchain infrastructure and comprehensive regulation, which increase the risk of technical failures and illicit activity.
For emerging markets and non-reserve currency countries such as South Korea, the growing use of dollar-pegged stablecoins could exacerbate exchange rate volatility and complicate capital flow management, the report said.
The central bank warned that the mass adoption of such assets could weaken the effectiveness of domestic monetary policy by undermining currency credibility and reducing banks’ capacity for credit creation.
The BIS echoed these concerns in a draft of its upcoming annual report, set to be released June 29, stating that stablecoins could dilute monetary sovereignty and introduce new transparency and capital flight challenges — especially in emerging economies.
reporter
Kim Dong-young
davekim0807@ajupress.com
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