South Korea Fast-Tracks Stablecoin Law as U.S. Treasury Markets Warn of Crypto-Driven Volatility

South Korea’s new president Lee Jae-myung introduced the Digital Asset Basic Act to legalise stablecoins.
The bill mandates fiat reserves and redemption guarantees for issuers, as part of Lee’s broader crypto-friendly agenda.
But the Bank of Korea opposes privately issued stablecoins, warning they could undermine monetary policy.
Additionally, analysts warn that confidence shocks in stablecoins may trigger mass T-bill selloffs and market disruptions.

Just a week after winning a snap election, South Korea’s new president, Lee Jae-myung, is moving to legalise domestic stablecoins through a new legislative package designed to open the floodgates for local issuers.

On Tuesday, Lee’s Democratic Party introduced the Digital Asset Basic Act, a regulatory framework focusing on increasing transparency for crypto assets and intensifying competition in the sector. Moreover, it would allow Korean companies to issue stablecoins pegged to fiat, provided they hold at least 500 million won (around AU$564K) in equity and secure approval from the Financial Services Commission.

All stablecoin Issuers would also be required to maintain reserves and guarantee redemption rights for holders.

As Crypto News Australia reported, Lee was elected on June 4 with around 49.4% of votes. He pledged to legalise spot crypto ETFs and work on providing a better environment for crypto assets. He also floated the idea of allowing the national pension fund to invest directly in crypto markets.

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Not everyone is on board. As expected, the Bank of Korea Governor Rhee Chang-yong has publicly pushed back, warning that privately issued stablecoins could undercut monetary policy and distort macroeconomic control.

The central bank has insisted that if a won-pegged stablecoin is going to exist, it should fall under its direct oversight.

That sets the stage for a regulatory tug-of-war between Lee’s administration and the central bank. For now, the momentum is with the presidency.

Clash With US Treasuries

The short-term Treasury market currently has around US$6T (AU$9.2T) in outstanding bills, making it one of the safest and most stable segments of the US financial system. But stablecoins have always required significant backing in those very same instruments.

The two largest stablecoin issuers, Tether and Circle, already hold a combined US$166B (AU$254B) in Treasuries, according to Bain & Company. That number is expected to grow sharply under a regulatory framework that enshrines their reserve requirements.

But there’s a problem. As reported by Reuters, Cristiano Ventricelli, analyst at Moody’s, warned that anything that triggers a loss of confidence in stablecoins could cause rapid T-bill liquidation, adding:

A problem in the stablecoin sector could spill over into broader financial markets. This could trigger large-scale liquidations, potentially depressing Treasury prices and disrupting fixed-income markets.