The Bank of Korea (BoK) has released a report expressing concerns over the risks of stablecoins losing their peg, particularly those denominated in won.
The central bank noted that private issuers lack the institutional trust necessary to maintain the stability of these coins. Hence, the regulator urges traditional banks to take the lead.
The risks highlighted by the BoK are compared to historical currency failures, dating back to the free banking era in the United States in the mid-19th century. The primary concern is the depegging of “stablecoins,” where the exchange rate deviates from the underlying asset.
The report mentions the collapse of the Terra ecosystem. Central bank representatives noted that the project’s algorithmic stablecoin “collapsed within days, causing countless investors to lose their assets overnight.”
According to BoK’s observations, even leading coins like Circle’s USDC can lose their peg. During the American banking crisis of 2023, the coin fell below $0.9.
Concerns about non-dollar stablecoins with limited circulation are “particularly serious,” the central bank emphasized.
Despite the warnings, BoK “does not intend to stifle innovation” but aims to ensure investor safety.
“When discussing won-denominated stablecoins that aspire to be a new currency, the first question should not be ‘is the technology feasible?’ but ‘is trust possible?’” the report states.
The regulator believes private issuers should have a high level of “publicness” and establish institutional mechanisms to compensate for damages in case of a peg break.
In April 2025, BoK announced its intention to “actively participate” in creating legislation to regulate stablecoins.
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