Asia’s Stablecoin Regulatory Wave: South Korea, Hong Kong, and China’s Digital Asset Strategies

The global financial landscape is experiencing an accelerated push for stablecoin regulation, largely catalyzed by recent legislative developments in the United States. With the endorsement of dollar-pegged stablecoins through the enactment of the GENIUS Act by President Donald Trump’s administration, major economies across Asia are now urgently developing their own regulatory frameworks. This pivot underscores stablecoins’ increasing integration into the broader financial system, prompting key players like South Korea and Hong Kong to navigate intricate policy considerations, while China quietly explores opportunities for yuan-backed digital assets.

• The US GENIUS Act has spurred Asian economies, including South Korea and Hong Kong, to accelerate stablecoin regulation.
• South Korea’s proposed Digital Asset Basic Act faces opposition from the Bank of Korea over concerns about capital policy disruption.
• Dollar-backed stablecoins dominate the global market with $256 billion, far exceeding euro-pegged stablecoins.
• Hong Kong is emerging as a critical testing ground for yuan-backed stablecoins, with the HKMA focusing on real-world value.
• Despite a public ban on crypto trading, mainland China, via the People’s Bank of China, hints at stablecoins’ role in global finance.
• Significant user demand for stablecoins persists, with over 18 million South Koreans engaged in the crypto market.

South Korea’s Regulatory Crossroads

In South Korea, the regulatory debate surrounding stablecoins has intensified. The ruling party, led by President Lee Jae Myung, introduced the Digital Asset Basic Act, seeking to create a legal pathway for domestic entities to issue won-backed stablecoins. However, this proposal met with immediate apprehension from the Bank of Korea. Ryoo Sangdai, the bank’s senior deputy governor, voiced concerns that stablecoins could disrupt capital policies and impede efforts to internationalize the Korean Won. Governor Rhee Chang Yong further echoed these sentiments, drawing parallels to the instability associated with private currency issuance in the 19th century. John Park, Head of Korea at the Arbitrum Foundation, emphasized the global interconnectedness of stablecoins, noting their potential to serve as efficient bridges to international markets via decentralized exchanges. He advocated for central banks to guide rather than obstruct this evolution. The urgency is evident in market data: dollar-backed stablecoins command a significant global market share of $256 billion, dwarfing the $403 million held by euro-pegged stablecoins, despite Europe having established regulations. Domestically, South Koreans traded over $41 billion worth of USDT, USDC, and USDS in the first quarter alone, according to Bank of Korea data, highlighting substantial local demand.

Hong Kong’s Role in China’s Stablecoin Strategy

Hong Kong is advancing swiftly with its stablecoin regulatory agenda. The Hong Kong Monetary Authority (HKMA) is focused on ensuring stablecoins demonstrate tangible real-world value. Industry experts note that many firms applying for licenses to issue yuan-backed stablecoins are already active in global yuan payments, positioning Hong Kong as a crucial testing ground for financial instruments directly tied to the Chinese currency. While mainland China maintains a public ban on crypto trading, subtle shifts are observable. In June, People’s Bank of China Governor Pan Gongsheng indicated that stablecoins could play a role in global finance, particularly amidst rising geopolitical tensions affecting cross-border payments. This statement has influenced sentiment, evidenced by a large state-owned Chinese brokerage recently securing a crypto license in Hong Kong. Nevertheless, the consensus among industry observers, including Lily King of Cobo, is that Hong Kong will likely remain a controlled “sandbox” for Chinese experimentation, with Beijing maintaining its restrictive stance on the mainland.

Market Demand and Future Trajectories

Despite regulatory complexities, significant user demand for stablecoins persists. In South Korea, approximately 18 million individuals, representing over one-third of the population, are already engaged in the crypto market. Yoann Turpin, co-founder of Wintermute, highlighted that stablecoins could offer a more efficient on-chain system for capital flows, addressing existing challenges like capital controls. Sam Seo of the Kaia DLT Foundation underscored the distinct utility of a won-backed stablecoin compared to its US dollar counterparts. While short-term liquidity may favor swaps between the won and USDT, the long-term vision necessitates stablecoins from diverse national currencies to facilitate direct pairings and enhance cross-border settlement efficiency. This ongoing regulatory race among Asian nations reflects a strategic imperative to manage the financial implications of stablecoin adoption while vying for influence in the evolving global digital asset landscape.