Korea Ratings.KR: "Won Stablecoin Is a Response to Global Payment Market Changes, Not a Dollar Substitute"

"Building a Settlement System with Won Stablecoins"

An analysis has suggested that Korean won stablecoins should be understood not as a substitute for dollar stablecoins, but rather as a means of securing a 'settlement ecosystem' in response to changes in the global payments market.

On April 16, Ahn Taeyoung, Senior Researcher at Korea Ratings·KR, stated in a webinar, "The reason why a won-based stablecoin is needed is because dollar stablecoins are expanding," and made the following remarks.

With domestic users actively utilizing virtual asset exchanges and dollar stablecoins, the key issue is to establish a domestic settlement ecosystem to respond to the influx of global stablecoins. Ahn explained, "Given the current payment structure, when dollar stablecoins flow into Korea, they must be exchanged into won, which incurs costs and causes time delays. If a won stablecoin settlement system is established, dollar stablecoins can be instantly exchanged for won stablecoins." He added, "This would enable real-time micropayments in high volumes, and allow for currency exchange only when necessary."

He assessed that the competitiveness of won stablecoins as a substitute for dollar stablecoins is low. This is because dollar stablecoins already possess overwhelming networks and liquidity in DeFi and the global virtual asset market, while even euro stablecoins are struggling to secure liquidity.

He also evaluated that expanding demand from the payments market would be limited in the short term. Ahn commented, "Korea already has a very well-established payment infrastructure, so the additional utility of a won stablecoin as a simple means of payment is not significant. Even dollar stablecoins are currently used more for trading purposes, such as Bitcoin investment, rather than for payments."

If won stablecoins are introduced, he forecast that banks would face both opportunities for new revenue and challenges such as the risk of a 'coin run.' Ahn stated, "Banks will play an expanded social role by participating in the issuance and operation of stablecoins, and can also generate new revenue by managing reserve assets and providing custody services."

However, he emphasized, "There are considerable challenges to consider along with these opportunities," adding, "Even if the reserve assets are composed entirely of safe assets, if trust in redemptions is shaken, mass withdrawals can still occur, making it difficult to completely eliminate the 'coin run' risk."

He also noted the need to address the potential weakening of the deposit base. He said, "If some funds move to stablecoins, bank deposits could decrease, which could in turn increase banks' funding costs and reduce profitability. In particular, banks with a high proportion of demand deposits, which are more likely to leave, are more sensitive to these risks."

Regarding card companies, he analyzed that the possibility of won stablecoins shaking their existing revenue base in the short term is limited. Ahn predicted, "Since credit cards offer postpaid payment functions, it will be difficult for stablecoins to fully replace the advantages of credit cards."

He also suggested, "As merchants' commission rates are falling and the burden of high funding costs reduces the ability of card companies to offer benefits, consumers may use credit cards less. To offset the decrease in existing card payment fees, it is necessary to adopt a strategy that integrates stablecoins into the current payment network."

This content was produced with the assistance of AI translation services.