South Korea’s Presidential Favorite Pushes for National Stablecoin to Curb $40.8B Capital Flight

South Korea’s Presidential Favorite Pushes for National Stablecoin to Curb $40.8B Capital Flight

Lee Jae-myung, the Democratic Party’s presidential front-runner in South Korea, is advocating for a won-based stablecoin in a bold attempt to stem capital outflows and assert financial sovereignty.

In a recent policy forum, Lee stressed that relying on foreign-backed digital currencies such as USDT and USDC was undermining the country’s economic resilience. His proposal aims to plug the ongoing exodus of funds, which reached 56.8 trillion won ($40.8 billion) between January and March alone—nearly half of which flowed into foreign-issued stablecoins, according to The Korea Herald.

“We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,” Lee said.

Stablecoin Ban Hampers Domestic Innovation

Under current South Korean law, local stablecoins are prohibited, forcing exchanges and users to rely on U.S. dollar-backed alternatives. Lee’s proposal challenges this restriction, suggesting that a state-sanctioned digital won could retain domestic liquidity and reduce reliance on foreign assets.

A Bigger Digital Asset Vision

This proposal is one piece of a broader strategy. Lee’s digital finance agenda includes legalizing spot cryptocurrency ETFs, allowing institutional investments from entities like the National Pension Fund, and building an integrated crypto monitoring system with lower transaction costs for the public.

Both Lee and rival Kim Moon-soo from the People Power Party have voiced support for introducing spot crypto ETFs, marking a shift toward mainstreaming digital asset exposure.

Economists Sound Alarm Over Stablecoin Proposal

Not everyone is on board. Shin Bo-sung, senior researcher at the Korea Capital Market Institute, warned that stablecoins could inflate the money supply and risk transferring monetary authority to private issuers.

“Stablecoins are essentially another form of banking, creating money out of nothing,” Shin said. “We must not overlook the economic principles behind them.”

Democratic Party Forms Digital Asset Committee

On May 13, the Democratic Party formally launched its Digital Asset Committee, a specialized group to shape crypto regulation and encourage market development.

Meeting for the first time in Seoul’s National Assembly Members’ Hall, the committee stressed the urgent need to resolve legal ambiguity, particularly around stablecoin regulation.

This new initiative joins existing efforts by the Financial Services Commission (FSC), which previously launched both the Virtual Asset Committee and a public-private task force to oversee crypto policy.

Digital Asset Basic Act in the Works

The Democratic Party is also preparing to introduce the Digital Asset Basic Act, a landmark bill aimed at regulating cryptocurrencies and stablecoin issuers.

The proposed law would require stablecoin issuers to hold at least 50 billion won in reserves and obtain prior approval from the FSC, ensuring that monetary control remains in public hands.