Analysts: South Korea’s Stablecoin Pivot Will Hurt Card Companies, Boost Big Tech

South Korean experts claim that the nation’s stablecoin pivot could hamper the growth of card providers, but provide a boost to domestic tech giants.

Media outlets in the country reported on June 23, that Democratic Party lawmakers on the National Assembly’s Political Affairs Committee plan to roll out a bill named the Digital Asset Innovation Act next month.

The bill defines stablecoins as “value-stable digital assets.” It will also stipulate that would-be issuers will need to prove they have equity capital assets worth at least 1 billion won ($720,258).

Won-based stablecoins could potentially revolutionize the South Korean finance sector. They would allow people to make payments using privately issued tokens without involving fiat.

The Bank of Korea has expressed skepticism. It has urged caution and is warning of a deleterious effect on the commercial banking sector.

New Daily Kyungjae reported that credit card providers could also be adversely impacted by stablecoin rollouts.

The media outlet noted that experts are concerned that the card industry “may face a structural crisis in the long term as its payment base gradually weakens.”

Stablecoin rollouts could, the outlet warned, “may make it difficult for the industry to guarantee even short-term profitability.”

However, an employee at an unnamed card provider offered a ray of hope, explaining:

“It is difficult to predict the impact stablecoins will have on profitability. However, it will be difficult for them to replace our ability to offer spending on credit. That is the unique domain of card issuing companies.”

But credit appears to be something of a double-edged sword for card companies. The outlet reported that domestic card issuers have been trying to “defend their profitability by expanding their high-interest loan offerings.”

This, the outlet wrote, is causing a rise in loan defaults as “borrowers’ ability to repay is decreasing.”

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The average monthly default levels of South Korean card companies in the first quarter of the financial year hit 1.93%.

This is remarkably close to the 2% rate that the industry considers “dangerously high.” Worse still, three of the country’s biggest card firms (KB Kookmin, Hana, and BC Card) have already exceeded the 2% mark this year.

While banks and car providers are clearly fearful of what stablecoin-powered business could do to their industry, tech firms appear keen to embrace the change.

Pinpoint News reported that while years of regulatory uncertainty have limited business expansion, IT heavy-hitters are “moving quickly as governments around the world begin to show signs of establishing clear guidelines.”

The outlet made note of the likes of the search engine operator Naver and the chat app developer Kakao, both of which have been working on blockchain-related innovations for years.

Other firms said to be looking with interest at developments in the stablecoin space are the Hyundai subsidiaries Hyundai HT (smart homes) and Hyundai Mobis (auto parts).

Another smart home firm, Kocom, was also named, along with the software developer MediaZen, the connectivity provider Kaon Media, and the IT services firm Bridgetec.

The media outlet said that expectations are “growing” for a Naver stablecoin release and a link to web3 services that make use of this coin.

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Naver is the South Korean answer to Google. It has built up a vast ecosystem of web, IT, and payment services. An unnamed industry expert said:

“Positive changes in stablecoin policy will help accelerate Naver’s blockchain-related business.”

In Naver’s case, stablecoin-related business expansion has the potential to cross borders. The firm has a close historical link with Line, a chat app popular in Japan and other Asian markets.

A potential Naver-Line stablecoin cooperation or interoperability solution could provide a further boost, the outlet concluded.

South Korea’s stablecoin frenzy has led to a flurry of speculative activity on the nation’s stock and crypto markets.

Traders have been attempting to pre-empt lawmakers’ decision by snapping up stocks in firms that have previously expressed a willingness to do stablecoin-related business.

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