Asia Morning Briefing: Korea’s 'Onshore' Won Policy Could Hinder Its Stablecoin Ambition

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South Korea’s decision to shelve its central bank digital currency pilot in favor of private-sector stablecoins has sparked a wave of activities among fintechs and banks.

As CoinDesk previously reported, KakaoBank is weighing both issuance and custody roles, while Upbit and Naver Pay are collaborating on a payments-focused token that could help close the “kimchi premium” gap between local and global crypto prices.

The opportunity comes as Korea is moving to extend FX trading hours, allow more foreign participation in its onshore market, and position itself for inclusion in major global bond and equity indices. A regulated KRW stablecoin could fit into these modernization plans, offering faster settlement and tighter integration between banking and digital asset markets.

But any Won stablecoin effort is going to run into a massive wall: Korea's currency is not fully internationalized.

Since the Asian Financial Crisis of 1997, Korea has kept deliverable KRW trading entirely onshore. Foreign institutions cannot exchange won among themselves abroad, and every dollar–won transaction must be settled through domestic intermediaries under the Bank of Korea's supervision.

Authorities in Seoul maintain this system to monitor speculative flows, contain volatility, and preserve monetary policy autonomy.

So for a Won stablecoin to work, it would have to be only used with whitelisted, KYC-verified addresses that have some tie to Korea.

If a privately issued stablecoin becomes too dominant, it can erode a country’s control over its currency, encourage “unintended dollarisation,” and weaken the central bank’s ability to manage employment and price stability, Vera Yuen, a professor at Hong Kong University's business school told CoinDesk in a note.

The question is, just how useful would this on-shore only stablecoin then be?

Domestic interbank transfers in Korea settle around the clock, 365 days a year. Sending money from one account to another is immediate, free, and widely used, leaving little payment friction for a KRW stablecoin to solve inside the country.

Without a speed or cost advantage in domestic transfers, the token’s primary utility would lie in cross-border settlement — and that is precisely where the onshore-only rule becomes a brick wall.

Taiwan faces a similar dilemma. The island's central bank does not impose capital controls on the economy—the Taiwan dollar (NTD) is freely convertible—but it also can't be used offshore, making it of questionable utility as a stablecoin.

An NTD-pegged token would be bound by Taiwan’s stablecoin framework issued in June, which requires local bank issuance, 100% onshore reserves, and central bank oversight with foreign exchange reporting, which are designed to stop it from becoming an unregulated channel for moving NTD value abroad.

One day, a Won, and NTD, stablecoin may emerge, but its utility will likely be confined largely to domestic use rather than the global crypto market, so it'll play a very niche role.

It'd be a different story for a Hong Kong Dollar stablecoin as the currency, which is pegged to the U.S. dollar, has no restrictions on being used abroad.

Right now, it's wait a wait-and-see mode to determine how much demand there is for non-USD stablecoins and what role they will play in the broader crypto economy.

Market Movers

BTC: BTC is trading at 123,901.58, supported by broader market momentum as the S&P 500 and Nasdaq hover near record highs on softer inflation signals and speculation of Fed easing.

ETH: ETH is getting ready to challenge its all-time high, trading above $4700.

Gold: Gold rose 0.3% to $3,356.98 as mild U.S. inflation data boosted expectations for a Fed rate cut next month and increased the odds of further easing this year.

Nikkei 225: Asia-Pacific markets opened mixed Thursday, with Japan’s Nikkei 225 down 0.31% after hitting a record high in the prior session.

S&P 500: U.S. stocks climbed Wednesday, with the S&P 500 and Nasdaq hitting new records as steady inflation data fueled expectations for two Fed rate cuts this year.

Elsewhere in Crypto:

• Google’s app store is banning unregistered non-custodial crypto wallets (The Block)
• Ethereum Wallet MetaMask Will Likely Unveil Its Own Stablecoin this Week (CoinDesk)
• How Binance’s Yi He became ‘the most powerful woman in crypto’—and steered the company past its biggest ordeal (Fortune)