Stablecoins Should Be Treated as Both Payment Tools and Investment Assets, New Research Suggests

A stablecoin tied to the Korean won could give South Korea a stronger footing in the global stablecoin race, according to a recent report.

Stablecoins are increasingly used as both payment tools and investment assets, suggesting the need for a broader regulatory framework, according to a new research.

The report, titled "Launching a Korean Won Stablecoin: Implications and Considerations," was written by crypto investment firm Hashed’s research arm Hashed Open Research and commissioned by crypto startup Four Pillars. It was published on Mar. 24.

The researchers add that launching a Korean won (KRW) stablecoin could give South Korea a stronger footing in the global stablecoin race.

The report suggests that launching a won-based stablecoin might make the currency more practical for digital transactions in today’s society while also bridging the gap between Korea’s crypto market and international digital asset ecosystems.

It adds that the introduction of a KRW stablecoin “could help address structural inefficiencies in the Korean crypto market, and serve as the foundation for various fintech industries that emerge from this ecosystem.”

Hashed Open Research adds that the high liquidity of Korean exchanges could provide an advantage for a KRW stablecoin over alternatives like the yen or euro.

But while it is keen to see the use of won-pegged stablecoins increase, the report also highlights concerns over the rapid rise of dollar-based stablecoins, such as Tether (USDT) and USD Coin (USDC).

It adds that these capital outflows could grow into a bigger issue, potentially impacting Korea’s financial stability and the strength of the won.

In the report, Hashed Open Research calls for a dedicated regulatory framework for stablecoins, saying these assets “possess characteristics of both payment instruments and investment assets, requiring a dedicated regulatory framework.”

The report suggests allowing both banks and non-banks to issue stablecoins under strict licensing and security requirements.

It adds that foreign-issued KRW stablecoins should be regulated domestically, while foreign stablecoins pegged to other fiat currencies should only be allowed if they meet equivalent regulatory standards.