South Korea Debuts Its First Stablecoin Amidst Ambiguous Regulatory Landscape

BDACS, a digital asset custodian based in South Korea, has introduced KRW1, the nation’s inaugural won-pegged stablecoin, on the

blockchain. KRW1 is entirely backed by Korean won deposits secured at Woori Bank. Its launch follows the successful completion of a proof of concept (PoC) that demonstrated the stability of its technical setup. Built on a one-to-one reserve structure, the token features real-time API connectivity to provide transparent reserve verification. BDACS has clarified that KRW1 is currently in its testing stage and is not yet available for general use, reflecting the ongoing evolution of South Korea’s regulatory stance on stablecoins.

This rollout represents a noteworthy advancement in merging blockchain technology with conventional finance in South Korea. KRW1 is intended as an affordable solution for payments and settlements, with a particular focus on use cases such as distributing emergency relief through public programs. According to CEO Harry Ryoo, BDACS aims for KRW1 to set a technological benchmark for Korean stablecoins by harnessing blockchain to lower transaction expenses and streamline financial operations.

Avalanche, which underpins the KRW1 stablecoin, is playing a pivotal role in this project. Justin Kim, Ava Labs’ Head of Asia, pointed out that Avalanche’s robust performance and compliance capabilities make it an ideal infrastructure for such initiatives. The organization also indicated that KRW1’s debut is consistent with Avalanche’s broader strategy to grow its presence throughout Asia, especially as the company has revealed its intention to create AVAX reserve entities in the United States. This step further establishes Avalanche as a significant infrastructure provider in South Korea’s digital asset landscape.

The future of stablecoin adoption in South Korea faces significant regulatory hurdles. The country has not yet finalized specific rules for stablecoins, though legislative discussions are underway regarding requirements like full reserve backing and tighter scrutiny. For instance, the Democratic Party’s draft legislation would prohibit interest on stablecoins and enforce a $3.6 million minimum capital threshold, while the People Power Party’s proposal emphasizes licensing and transparency. BDACS has proactively adapted KRW1 to fit within anticipated regulations by securing a trademark for the token in December 2023 and developing a robust protocol for its issuance, oversight, and validation.

KRW1’s development is part of a larger movement of established

exploring the stablecoin sector, both in South Korea and internationally. Major banks like Kakao Bank, Kookmin Bank, and Industrial Bank of Korea have all applied for trademarks related to won-based stablecoins, while Japan’s JPYC is on track to become the first officially recognized yen-backed stablecoin later this year. This trend highlights a global shift as governments and institutions increasingly incorporate digital assets into their financial systems. With KRW1 undergoing pilot testing, it may pave the way for future stablecoin projects throughout the region.

BDACS has also shared its vision for KRW1’s next steps, which include deploying the token across more blockchains and exploring partnerships with issuers of USD-backed stablecoins like Circle and

. The company’s objective is to establish KRW1 as a versatile medium for remittances, payments, and investments, prioritizing interoperability and wider global reach. As South Korea’s digital asset landscape continues to transform, KRW1’s progression may shape regulatory frameworks and influence the direction of stablecoin innovation across Asia.