The Korean won is the second most traded fiat currency in global cryptocurrency markets, yet South Korea still has no stablecoin legislation in force — a gap that is pushing billions of dollars in won-denominated stablecoin activity offshore, Finbold reported.

The ranking places the won ahead of several major currencies in crypto trading volume, reflecting the depth of South Korea's retail-driven digital asset market. The country's exchanges, including Upbit and Bithumb, handle some of the world's heaviest spot trading activity. But that liquidity has no domestic stablecoin outlet, because Korean law currently provides no framework for issuing or regulating a won-pegged token.

What does the missing stablecoin law mean in practice?

Without a statutory basis for won-backed stablecoins, Korean users and firms that need dollar-pegged or won-pegged settlement tokens must route through offshore issuers. The report estimates that billions of dollars tied to Korean demand for stablecoins flow to foreign jurisdictions, where issuers operate under other regulatory regimes.

This creates two operational consequences. First, capital that could circulate inside Korea's financial system instead sits with offshore issuers, outside the reach of Korean supervisory tools such as transaction reporting and reserve verification. Second, Korean financial institutions and fintechs cannot legally build won-stablecoin products, ceding the market to foreign issuers and to dollar-denominated tokens.

Where does Korean regulation stand?

South Korea's National Assembly has debated stablecoin legislation following the broader Digital Asset Basic Act discussions, but no bill covering stablecoin issuance has passed. The country's existing framework, centered on the Act on the Protection of Virtual Asset Users, governs custodial conduct and market abuse at exchanges — not the issuance of payment tokens.

The Bank of Korea and the Financial Services Commission have both flagged stablecoins as a monitoring priority, with the central bank concerned about monetary sovereignty if won-linked tokens circulate outside its control. Legislators have proposed bills that would allow licensed institutions, potentially including banks, to issue won-backed stablecoins under FSC oversight.

Why does the offshore flow matter?

The billions moving offshore represent more than lost fee revenue. Stablecoins are increasingly used as settlement rails and treasury instruments by trading firms. When Korean market participants rely on foreign-issued tokens, on-chain activity tied to won liquidity migrates to infrastructure Korea does not supervise.

For exchanges, the absence of a domestic stablecoin limits product development in pairs and margin services. For institutions, it removes a compliant instrument for on-chain settlement in won. The market structure effectively exports the regulatory perimeter along with the volume.

Legislators face pressure to resolve the gap before offshore issuance consolidates further. Passage of a stablecoin bill defining who may issue, what reserves must back tokens, and which agency supervises them would determine whether those billions return to Korean-regulated infrastructure or remain abroad.