Bank of Korea Weighs Deposits for Stablecoin Reserves
The Bank of Korea has proposed that issuers of won-based stablecoins should deposit reserve property immediately on the central financial institution. The proposal appeared in paperwork the financial institution submitted to the National Assembly’s finance committee on October 1.
The authorities plans to publish its first draft invoice on won-pegged stablecoins in October. Policymakers argue that tighter controls will defend customers and cease personal issuers from exploiting seigniorage-like earnings.
Bank of Korea Pushes for Stricter Controls
According to the South Korean financial each day Herald Economy report and the submission, the BOK mentioned that “if deemed needed by the central financial institution, obligatory deposit necessities of reserve property on the central financial institution needs to be thought of.” The financial institution emphasised that such a measure may scale back dangers linked to sudden redemption surges and uncontrolled cash provide development exterior its oversight.
The BOK defined that issuers revenue by investing reserves in risk-free property reminiscent of authorities bonds. Redirecting these reserves into central financial institution deposits would cap issuers’ earnings at coverage fee ranges.
Citing international precedents, the BOK highlighted the US Federal Reserve, which pays policy-rate curiosity on deposits however doesn’t impose obligatory necessities. In the US, solely Fed-approved entities could situation stablecoins.
The BOK added that requiring deposits inside the central financial institution may align stablecoins extra carefully with the standard fee system and guarantee redemption certainty. Officials mentioned this step would construct consumer confidence and scale back systemic dangers if stablecoins increase to a major share of transactions.
Full Reserve Demands and October Bill
The measure may scale back the profitability of stablecoin issuance in Korea and discourage non-bank gamers. Yet the BOK argued that the tradeoff gives larger stability, together with stronger safeguards in opposition to a “coin run” or mass redemptions.
The central financial institution additionally backed a full reserve model, stating that issuers ought to deposit 100% of their liabilities in secure property, much like guidelines for pay as you go fee devices. It urged making a coverage council to outline eligible reserves, whereas permitting the federal government to refine guidelines by presidential decrees.
On issuance, the BOK mentioned, “Because of dangers reminiscent of regulatory arbitrage and potential restructuring of the monetary business, preliminary issuance ought to come from consortia led by banks with sturdy compliance capability, earlier than increasing extra broadly.”
The Financial Services Commission plans to launch its official legislative draft in October. That transfer will present how Korea positions itself within the international race to manage stablecoins.
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