[Bitcoin Now] CBDC and Stablecoins to Coexist... Will the 'Two-Track Digital Currency Strategy' Become Reality?

Deposit Tokens as a Stable Digital Currency Structure
Phased Introduction Tailored for Non-Reserve Currency Countries
No Legislative Authority, but Provides Substantial Policy Guidance

The coexistence of central bank digital currency (CBDC) and stablecoins is emerging as a likely scenario in digital currency policy. This is because Shin Hyun Song, the nominee for Governor of the Bank of Korea, has indicated the possibility of both CBDC and private stablecoins operating concurrently. Attention is now focused on whether a "two-track strategy"—which maintains a central bank-driven monetary order while also accommodating private sector innovation—will become a reality.

According to iM Securities on April 21, nominee Shin expressed the view that CBDC and bank-issued deposit tokens should be at the core of the digital currency ecosystem. This stance is consistent with the "Token Economy and Blockchain Fragmentation" report published during his tenure at the Bank for International Settlements (BIS).

Shin pointed out that the structural characteristic of blockchain-based currency systems—their fragmentation into multiple chains—makes it difficult to maintain the essence of money as having "the same value everywhere" (singleness). He explained that the utility of money increases the more it is integrated, due to network effects. However, blockchain incurs costs because of the validator reward structure, which leads to higher user fees and incentivizes movement across chains, ultimately resulting in the coexistence of multiple chains. From this perspective, stablecoins, which are separated by individual chains, struggle to function as a single currency and could undermine the consistency of the monetary system.

Shin assessed that a stable digital currency structure would be achieved by combining CBDC based on central bank money and deposit tokens that maintain the trust of the existing banking system. He also emphasized that, for non-reserve currency countries like Korea, regulatory compliance—such as anti-money laundering (AML), know-your-customer (KYC) requirements, and foreign exchange regulations—is particularly important. Thus, he argued that it would be realistic to consider a gradual expansion in the early stages, starting with a bank-centered structure (in the form of a consortium) where regulatory compliance capabilities have been verified, and then progressively allowing participation from non-bank entities.

Regarding the Digital Asset Basic Act, it is necessary to distinguish between the legal authority and the actual influence of the Governor of the Bank of Korea. Institutionally, since the bill is being promoted through policy design by the Financial Services Commission and the legislative process of the National Assembly, it is difficult to view the Governor of the Bank of Korea as the direct legislative actor. However, key issues such as stablecoins, deposit tokens, and CBDC go beyond mere industry regulation and are directly connected to the payment and settlement systems and the monetary order, which have traditionally been the core jurisdiction of the Bank of Korea. In particular, stablecoins based on the won, which are essentially digital currencies issued by the private sector, make it inevitable that the policy stance of the Bank of Korea will be strongly reflected in areas such as maintaining monetary singleness, financial stability, and the potential for bank runs.

The Digital Asset Basic Act, which is the second phase of legislation following the "Virtual Asset User Protection Act" implemented in July 2024, is a comprehensive bill covering the issuance, distribution, and disclosure of virtual assets across the market. While the bill has been under discussion since the 21st National Assembly, a legislative vacuum persists to this day. Last June, Min Byung Deok, a lawmaker from the Democratic Party of Korea, sponsored the bill, but the submission of the government draft continues to be delayed.

The main reason for the delay in passing the bill lies in policy disagreements over the governance structure of exchanges and the issuance structure of stablecoins. In March this year, the Financial Services Commission's Virtual Asset Committee discussed major issues such as a bank-centered (50%+1 share) stablecoin issuance structure and restrictions on the shareholdings of exchange major shareholders. This is directly related to the policy decision of whether to view stablecoins as a means of private innovation or as a quasi-currency that is directly connected to payment and settlement and monetary stability, thus requiring regulation centered on banks. As disagreements on these key issues persist, the review and passage of the bill have also been delayed, coinciding with major events such as the Middle East conflict and local elections.

Yang Hyunkyung, an analyst at iM Securities, stated, "While the Bank of Korea is not the official legislative body, it acts as a key institution that has a substantial impact on the direction of the bill's design through its opinions and policy coordination. Although the Governor of the Bank of Korea does not directly legislate or pass the Digital Asset Basic Act, it is fair to say that the governor plays an important role in proposing or guiding policy direction on major issues closely linked to the monetary system, such as the issuance structure of stablecoins and the introduction of deposit tokens."

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