[Bitcoin Now] CBDC and Stablecoins Coexist... Is the 'Two-Track Digital Currency Strategy' Becoming a Reality? (Comprehensive)

Deposit Tokens Offer a Stable Digital Currency Structure
Gradual, Tailored Adoption for Non-Reserve Currency Countries
No Legislative Power, But Provides Substantive Guidelines

Hyun-Song Shin, the new Governor of the Bank of Korea, is arriving at the Bank of Korea in Jung-gu, Seoul, on the 21st. Photo by Jinhyung Kang

The coexistence of central bank digital currency (CBDC) and stablecoins is becoming increasingly likely in digital currency policy. This is because Hyun-Song Shin, Governor of the Bank of Korea, has suggested the possibility of running CBDC and private stablecoins in parallel. Attention is now focused on whether a 'two-track strategy'—which maintains the central bank-led monetary order while embracing private sector innovation—will become a reality.

At his inauguration ceremony held at the Bank of Korea in Jung-gu, Seoul, on April 21, Governor Shin stated, "We must proactively prepare for the design of the future monetary system in response to digital financial innovation," adding, "Through the second phase of Project Han-Gang, we will enhance the use cases for CBDC and deposit tokens." The second phase of Project Han-Gang involves the Bank of Korea issuing 'institutional digital currency' based on blockchain technology, while participating financial institutions issue 'deposit tokens' as linked payment and settlement instruments. The project then verifies whether financial consumers can use these instruments in their daily lives without any issues.

At the National Assembly’s Strategy and Finance Committee confirmation hearing on April 15, Governor Shin stated that CBDCs and bank-issued deposit tokens should be at the core of the digital currency ecosystem. This aligns with his previous research report published during his tenure at the Bank for International Settlements (BIS) titled "Tokenized Economies and Blockchain Fragmentation."

Governor Shin pointed out that the structural segmentation of blockchain-based monetary systems makes it difficult to maintain the essential 'singleness' of money—meaning the same value everywhere. As money becomes more integrated through network effects, its utility increases. In contrast, the reward structure for validators in blockchain creates costs, leading to higher user fees and encouraging cross-chain movement, which can ultimately result in the coexistence of multiple chains. From this perspective, stablecoins, which are separated by chain, are unlikely to function as a unified currency and may undermine the consistency of the monetary order.

Governor Shin evaluated that a stable digital currency structure consists of CBDCs based on central bank money and deposit tokens that maintain the trust of the existing banking system. He also noted that for non-key-currency countries like Korea, it is crucial to comply with regulations such as anti-money laundering (AML), know-your-customer (KYC), and foreign exchange controls. Therefore, in the initial stage, it is more realistic to consider a gradual expansion in which non-bank entities participate in a bank-centric (consortium-based) structure whose regulatory compliance capabilities have already been verified.

Regarding the Digital Asset Basic Act, it is important to distinguish between the statutory authority and the actual influence of the Bank of Korea Governor. Institutionally, since the legislation is promoted through the policy design of the Financial Services Commission and the legislative process of the National Assembly, the Governor of the Bank of Korea is not the direct legislative body. However, key issues such as stablecoins, deposit tokens, and CBDC go beyond simple industry regulation and are directly linked to the payment and settlement system and the monetary order—areas that have traditionally fallen within the core jurisdiction of the Bank of Korea. In particular, since won-based stablecoins are private-sector digital currencies in practice, the Bank of Korea’s policy stance is inevitably strongly reflected in aspects such as the maintenance of monetary singleness, financial stability, and the potential for bank runs.

The Digital Asset Basic Act, a second-stage follow-up to 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 entire market. Although discussions on the bill have continued since the 21st National Assembly, a legislative gap remains to this day. Lawmaker Min Byungdeok of the Democratic Party of Korea proposed the bill in June last year, but the government’s bill submission is still delayed.

The main reason for the delay in passing the bill stems from policy disagreements over the governance structure of exchanges and the issuance structure of stablecoins. In March of this year, the Financial Services Commission’s Virtual Asset Committee discussed core issues such as a bank-centric (50%+1 shareholding) stablecoin issuance structure and restrictions on the shareholding of major exchange shareholders. The policy debate centers on whether to regard stablecoins as a tool for private innovation or as a quasi-currency closely tied to payment, settlement, and monetary stability, thus requiring regulation centered on banks. As disagreements over these critical issues persist—and as major events such as the Middle East war and local elections coincide—the legislative review and passage of the bill have also been delayed.

Yang Hyunkyung, a researcher at iM Securities, stated, "Although the Bank of Korea is not an official legislative body, it acts as a key institution that has a substantial influence on the direction of the bill’s design through policy coordination and by offering opinions. While the Governor of the Bank of Korea is not in a position to directly legislate or pass the Digital Asset Basic Act, he plays an important role in proposing or guiding policy direction on key issues closely linked to the monetary system, such as the structure for issuing stablecoins and the introduction of deposit tokens."

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