[Stablecoin Supervision] ① Industrial Promotion or Financial Regulation...the Line Is Drawn by "Consumer Protection"

Should they be viewed as an industry, or as a financial product?

Experts analyze that the direction of system design can change completely depending on how stablecoins are perceived. This is because the overall institutional framework, including not only eligibility for issuance and equity structure but also rules on reserves and the allocation of supervisory authority, can be reshaped. The decisive criterion that divides this debate between the two camps is ultimately "consumer protection." Experts agreed that in order to find a balance between promoting innovative industries and maintaining financial stability, consumer protection must be a prerequisite.

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According to the financial and political sectors on the 22nd, the Democratic Party of Korea's digital asset task force (TF) plans to finalize its draft of the Digital Asset Basic Act on the 24th after holding an advisory committee meeting. There are two main points of conflict between the government bill and the legislative proposal from the political sphere. One is a plan to limit the equity stake of major shareholders of exchanges to 15-20%, and the other is whether to mandate banks to hold "50%+1 share" in stablecoin-issuing consortia.

The Financial Services Commission is reviewing a requirement that consortia in which banks hold more than "50%+1 share" be made a condition for issuance. In contrast, some in the political sphere argue that this amounts to favoring a specific business sector and could be a regulation that discourages founders' accountable management and innovation.

Nevertheless, experts largely agree that a consortium model in which banks hold a certain level of control is an appropriate form of issuer.

Kim Youngsik, professor in the Department of Economics at Seoul National University, assessed that, with regard to the issue of the issuing entity, which is a key point of contention in the Digital Asset Basic Act, a consortium model that considers both stability and innovation could be a realistic compromise. He noted, "We need a structure in which stability is secured by the existing banking sector and innovation is driven by fintech," adding, "A model that combines the banks' trust base with the technological capabilities of fintech is a realistic alternative." The logic is that if banks hold effective decision-making authority, stability can be secured, and that stability can in turn translate into consumer protection.

Lee Jeongdoo, senior research fellow at the Korea Institute of Finance, also said that a consortium structure led by banks is realistic, citing the introduction of internet-only banks and integrated investment platforms as examples. He explained, "When internet-only banks were introduced, the key issue was also how to reconcile the stability of the existing financial sector with the innovativeness of fintech," adding, "In the end, they were established in the form of bank-led consortia." He added, "For stablecoins as well, it is desirable to adopt a structure that combines the stability of large financial institutions with capital strength and accountability with the technological capabilities and know-how of fintech and virtual asset operators," and suggested that "when forming consortia, it is also possible to give extra points for these elements."

Park Yongbeom, professor at Dankook University and president of the Korea Blockchain Society, said, "The key issue is whether to view stablecoins as finance or as a product of technological development," adding, "If you look at the issuing entity from the perspective of industrial development, a bank-centered structure may be realistic in terms of stability and consumer protection." The reasoning is that if stablecoins are interpreted as financial products, they naturally fall under the financial legal framework and will inevitably be designed around a bank-centered structure.

However, Professor Park argued that stablecoins should be interpreted as technological infrastructure or part of future preparation rather than being definitively regarded as one pillar of the financial industry. He said, "Stablecoins are an extension of the development of cryptocurrency technology, and it is difficult to see them as a development of traditional finance," emphasizing, "From the standpoint of preparing for our future, we need to set the direction from a technological development perspective, rather than simply examining what is lacking in finance." In other words, stablecoins should be viewed as part of the development process of the technology industry, but on the precondition that strong consumer protection mechanisms are put in place.

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The key issue is how, and to what extent, consumers can be protected in the process of bringing stablecoins into the regulatory framework. If industrialization is rushed without sufficient safeguards, some coins may appear and disappear simply because they are based on new technologies, and the resulting damage could be passed directly on to consumers.

International standards also recommend that consumer protection and financial stability be placed at the center of system design. The International Organization of Securities Commissions (IOSCO) has put forward the principle of "Same Activity, Same Risk, Same Regulation" in its crypto-asset regulatory principles. The idea is that if stablecoins perform functions similar to payment instruments, they should be subject to corresponding supervision, disclosure, and transparency regarding reserves.

IOSCO in particular presents as core principles: holding reserves in safe assets; ensuring 1:1 redemption; preventing conflicts of interest; segregating customer assets; and maintaining a transparent disclosure framework.

Professor Park said, "It is not easy to rapidly grow an industry while at the same time perfectly protecting consumers," but added, "That does not mean we can avoid this difficult task." As an alternative, he proposed a sandbox-based phased expansion. He argued that an approach that starts with small-scale experiments and then gradually expands is needed.

Research fellow Lee likewise noted, "If stablecoins become linked to the traditional financial system, it is crucial to ensure user protection, and to that end, specific regulations are needed on the management and verification of reserve assets and on improving the convenience of redemption."

However, he also expressed the view that it is difficult to regard stablecoins as identical to bank deposits, and that it would be overly burdensome in practice to fully incorporate them into the banking law framework. He explained, "The structure is similar to services like KakaoPay or Naver Pay, where users deposit prepaid funds and use them in the form of 'money'," adding, "In terms of their nature, it is more reasonable to regulate them under the Electronic Financial Transactions Act framework rather than as part of banking." He went on to say, "We must not confuse the legal framework with the governance structure," emphasizing that "equity requirements and the allocation of supervisory authority should be approached as separate matters of policy judgment."

The task force also regards the balance between industrial promotion and consumer protection as the core challenge. Ahn Dogeol, a Democratic Party of Korea lawmaker who serves as TF secretary, stated, "We will adopt a basic framework in which the banking sector holds the lead, but we will also fully reflect the views of the fintech and virtual asset industries," adding, "We will coordinate the government bill and the TF proposal in a direction that captures both stability for consumer protection and innovation." He further explained, "We will design the framework so that banks, based on their accountability and capital strength, provide the foundation of trust, while fintech companies can play the role of 'accelerator' for technological innovation."

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