Stablecoins Increase, Cards Fall: Specialists See Huge Tech Gaining In South Korea

South Korea is on the verge of setting clear rules for stablecoins. If passed, the Digital Possession Development Act might improve how individuals pay for services and goods. It will also test the strength of banks and card companies.

Legislators in South Korea are moving swiftly to establish guidelines for stablecoins. The proposed Digital Possession Development Act could revolutionize the way people transact for products and services while also challenging the dominance of traditional banks and card issuers.

High Capital Barriers For Issuers

Reports indicate that any stablecoin issuer in South Korea will be required to maintain a minimum equity capital of 1 billion (approximately USD 720,258). This stringent requirement is expected to sideline smaller startups, allowing only established players or well-funded corporations to enter the market.

The Democratic Party members in the National Assembly’s Political Affairs Committee are gearing up to introduce the bill next month. The legislation aims to formally categorize stablecoins as ‘value-stable digital assets’ and establish definitive regulatory frameworks.

Pressure On Card Companies

Experts warn that the rise of stablecoins could pose a threat to the traditional credit card industry in South Korea. The shift towards digital assets might erode the payment ecosystem dominated by credit cards, potentially impacting the long-term sustainability of card providers.

With credit card companies already grappling with a rising loan default rate of 1.93% in the first quarter, nearing the critical 2% threshold, the emergence of stablecoins could further exacerbate their financial challenges.

Bank Concerns Rise

Despite the growing interest in stablecoins, the Bank of Korea remains cautious about the potential risks associated with digital tokens. The central bank has raised concerns that widespread adoption of stablecoins for daily transactions could lead to a reduction in banking fees and deposits, ultimately affecting the profitability of commercial banks.

Banks in South Korea may need to reassess their business strategies and consider developing their own digital solutions to retain customers in the evolving financial landscape.

Tech Firms Ready To Act

While traditional financial institutions express reservations, major tech companies in South Korea, such as Naver and Kakao, are actively exploring opportunities in the blockchain space. These tech giants are eyeing the integration of won-backed tokens into their platforms and services, signaling a potential shift towards digital innovation.

Companies like Hyundai HT, Hyundai Mobis, Kocom, MediaZen, Kaon Media, and Bridgetec are also monitoring the developments closely, indicating a broader industry interest in digital assets and blockchain technology.

Speculation Hits Stocks And Crypto

Investors and speculators have already begun reacting to the anticipated regulatory changes. The local cryptocurrency and stock markets are experiencing heightened activity, with shares of companies associated with stablecoin initiatives witnessing significant gains.

However, this speculative fervor also carries inherent risks, as any delays or amendments to the legislation could trigger market volatility and price corrections.

Featured image from Unsplash, chart from TradingView