Will Lee Jae-myung’s Won-Backed Stablecoin Stem Korea’s $40.8B Crypto Outflow?

South Korea’s opposition leader, Lee Jae-myung, proposed launching a won-backed stablecoin on May 20 to stem the 56.8 trillion won ($40.8 billion) crypto outflow and reduce dependence on foreign stablecoins like USDT and USDC.

The Democratic Party presidential candidate’s broader digital asset strategy also includes legalizing spot crypto ETFs and allowing institutional crypto investments under government oversight, indicating a shift in national policy.

Lee Jae-myung has recently made public appearances, including a policy speech last week with economics-oriented YouTubers, promoting stablecoins as a means to preserve national wealth and modernize the financial system.

In his speech, Lee addressed South Korea’s crypto sector’s massive capital outflow problem. Between January and March 2025, South Korean exchanges recorded 56.8 trillion won (approximately $40.8 billion) in crypto asset outflows.

Nearly half of these movements were tied to U.S. dollar-based stablecoins like USDT and USDC, the only ones currently allowed for domestic trading.

Lee emphasized that establishing a won-backed stablecoin market is key to preventing national wealth from leaking overseas and preserving South Korea’s financial sovereignty.

He reportedly stated, “Stopping capital flight falls within national economic security. A won-based stablecoin can help preserve domestic financial value and lower our dependability on foreign currencies.”

The proposal is part of his broader digital asset strategy, which also includes legalizing spot cryptocurrency exchange-traded funds (ETFs) and allowing institutional investments, such as the National Pension Fund, to be supervised by the government once price stability criteria are met.

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Currently, South Korean law prohibits the issuance of domestic stablecoins, forcing exchanges to rely on U.S. dollar-based stablecoins.

South Korean regulators have long been wary of domestically issued stablecoins, partly due to the collapse of TerraUSD in 2022, a South Korean-linked project that triggered global scrutiny of algorithmic stablecoins.

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However, Lee’s plan envisions a regulated, won-backed stablecoin with strict reserve requirements. Issuers would need approval from the Financial Services Commission and maintain reserves of at least 50 billion won, as proposed in the upcoming Digital Asset Basic Act.

While the proposal has gained support among younger voters and crypto enthusiasts, economists and regulatory experts have expressed concerns.

Shin Bo-sung of the Korea Capital Market Institute warned that stablecoins could inflate the money supply and shift monetary control to private issuers, stating, “Stablecoins are essentially another form of banking, creating money out of nothing.”

While Lee’s plan calls for fiat-backed versions with strict reserve rules, critics warn that operational risks, including redemption failures and liquidity mismatches, remain relevant.

Political support for more general crypto reforms and stablecoin distribution is taking center stage in the upcoming presidential election. With more than 15 million crypto enthusiasts in South Korea, many of whom are young and tech-savvy, the topic has become a focal point in the 2025 presidential contest.

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Lee’s advocacy of a domestic stablecoin fits nicely with a larger reform agenda. In addition to Lee’s proposal, the Democratic Party launched a Digital Asset Committee on May 13, 2025, at the National Assembly Members’ Hall in Seoul. The committee’s mandate is to develop cryptocurrency policies, promote industry growth, and address regulatory uncertainty, especially concerning stablecoins.

Also this week, the Democratic Party will likely present the Digital Asset Basic Act, a legislative initiative to create a legal basis for cryptocurrencies and other technologies in Korea.

The proposed law will clarify the legal status of digital assets and set guidelines on issuance, circulation, and listing. It will also include strict requirements for stablecoin issuers.

Businesses wishing to create won-backed stablecoins must keep at least 50 billion won in reserves and get clearance from the Financial Services Commission (FSC).

In addition, the act is expected to include infrastructure requirements for digital asset service providers and investor protection policies.

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