Bank of Korea establishes virtual asset division

The Bank of Korea (BOK), South Korea’s central bank, has officially launched a Virtual Asset Division, also referred to as the “Cryptoassets Department” or “Virtual Asset Group.” The new division studies the rapidly evolving digital asset landscape and contributes to ongoing policy discussions, particularly around stablecoins pegged to the Korean won (KRW).

According to a local media outlet, News1, the new virtual asset unit is a part of the central bank’s Financial Payment Systems Bureau. Its main responsibility will be to monitor the crypto industry, analyze risks, and participate in policy discussions on virtual currencies and stablecoins specifically.

The decision was the latest in a series of measures to curb rapid growth in digital finance technologies, particularly the emergence of KRW-based stablecoins, by the BOK. According to Central Bank officials, the institution has a growing consensus that a dedicated unit is needed solely to monitor these developments and help shape national policy accordingly.

The Bank of Korea is clarifying that it wants to play a leading role in shaping the country’s digital financial future. This reflects its growing focus on building a strong and well-regulated digital finance system in South Korea.

Central Bank revamps approach to digital currency

In addition to the new division, the BOK has rebranded its Digital Currency Research Team to the Digital Currency Team, a subtle but meaningful distinction demonstrating a shift from theoretical research to real-world application. 

For years, the central bank has been considering the potential launch of a central bank digital currency (CBDC), though reports now indicate that the project has been paused.

Considering the heat of stablecoin development, a new factor has arisen, particularly for those backed by the Korean won. Private companies have rushed in to fill the void in growing demand for digital currency, temporarily easing the urgency for a government-issued alternative..

Nonetheless, BOK Governor Lee Chang-yong has insisted that KRW-pegged stablecoins are unavoidable. However, he has also sounded cautious about allowing non-bank entities to dominate this space, which might raise certain critical issues and potentially create chaos in the financial system.

Political and corporate leaders drive stablecoin momentum

Politicians in South Korea have also signaled an openness to stablecoins. The recently elected President Lee Jae Myung of Korea has clearly said there is a national consensus about regulated stablecoins that are to be based on the value of KRW. That is one way for his government to curb capital outflow, support monetary sovereignty, and encourage domestic innovation.

A lawmaker from the ruling party already has introduced a similar bill, and the private sector, moving quicker than the state, is already mobilizing to hold its own. Major banks and leading fintech firms are now filing applications for “stablecoin” trademarks.

The bill is intended to provide consistent standards for issuance, possession, conformity, and application that do not exist today.

Experts say this would be clear evidence of a digital currency race emerging, with public and private actors vying for influence.