South Korea’s top financial regulator is prepared to let the country’s biggest tech giants issue their own stablecoins pegged to the South Korean won.

That’s according to the South Korean outlet News Watch, which quoted unnamed industry sources as stating that the Financial Services Commission, the FSC, is seriously considering a proposal that would let companies outside the financial industry issue stablecoins.

“Some insiders are concerned by this,” News Watch said. “They think that letting technologically advanced big tech and fintech companies into the stablecoin market may weaken banks’ competitiveness.”

Observers are predicting the outbreak of an IT-powered “competition” between banks and the country’s biggest tech giants.

Government wants to give big tech free rein

The South Korean government is in favor of allowing major companies and large commercial banks to issue KRW-pegged coins.

President Lee Jae-myung pledged to “open” the South Korean stablecoin market to domestic players ahead of his election in June.

But his efforts to make good on his promise have so far been thwarted by the Bank of Korea, which has objected to the idea of non-financial firms issuing coins.

Seoul banned cryptocurrency and stablecoin issuance in 2019. But now it seems both the government and the country’s leading regulators are aligned as they seek to push approval through the National Assembly.

Banking industry officials remain cagey on the matter, however. An unnamed official from a major South Korean commercial bank said that big tech firms’ participation in the stablecoin market was “still in the discussion stage.”

“The uncertainty makes it difficult to definitively assess what impact [allowing tech firms to issue stablecoins] would have on competition in the market,” the official said. “We plan to develop our own technical and institutional response measures as the government’s plans become more concrete.”

Another unnamed official from a different bank said that won-pegged stablecoin issuance would require “both stability and innovation.”

“We don’t foresee any significant changes to competition in the financial sector,” the official added.

And a third anonymous bank representative told News Watch that if the government decides to incorporate crypto into the finance sector, banks would play a bigger role regardless.

Traditional banks will need to be involved in big tech’s stablecoin projects to provide anti-money laundering-related assistance, as well as asset custody and payments services, the third official claimed.

Banks scramble to adopt stablecoins

Despite South Korean institutions’ seeming indifference to the threat of stablecoin-issuing big tech firms, actions speak louder than words.

All of the country’s biggest banks have launched stablecoin and crypto-related task forces and business units in recent months.

These include South Korea’s five biggest lenders: Kookmin, Shinhan, KEB Hana, Woori, and Nonghyup.

The firms have been testing a wide range of stablecoin usage scenarios in the international remittances space, as well as custody and blockchain-powered financing.

Nonghyup, for instance, has told its in-house blockchain unit to conduct overseas remittance-related tests using a Korean won-Japanese yen stablecoin prototype.

Tim Alper is Korean-speaking News Correspondent at DL News. Got a tip? Email at tdalper@dlnews.com.