Circle’s Arc Paves the Way for South Korea’s First Stablecoin Backed by Won

Circle’s Arc attracts South Korea’s first won-backed stablecoin experiment

South Korea’s crypto custodian, BDACS, has embarked on an ambitious project to launch a won-backed stablecoin called “KRW1” on Circle's newly introduced blockchain, Arc. This initiative represents a significant development for Korea’s engagement in the global cryptocurrency arena, allowing domestic companies to join the worldwide stablecoin network.

Key Takeaways

New Development: BDACS is set to issue KRW1, a won-backed stablecoin, on Circle's Arc blockchain.
Collaboration: This project comes after BDACS signed a memorandum of understanding with Circle, establishing a cooperative framework.
Testnet Launch: Circle's Arc has initiated a public testnet, attracting participation from over 100 global firms.
Criticism of Bank Involvement: An expert criticized the Bank of Korea's insistence on banks managing stablecoin issuance, advocating for broader regulatory frameworks.

Launching KRW1 on Circle's Arc

BDACS, a cryptocurrency custodian based in Busan, has announced plans to launch a won-backed stablecoin, named KRW1, on Circle's new blockchain platform, Arc. According to a report by Yonhap News Agency, BDACS has signed a memorandum of understanding (MOU) with Circle to facilitate the development and deployment of KRW1 on the Arc blockchain.

Ryu Hong-yeol, the CEO of BDACS, highlighted the importance of this collaboration, stating, "This collaboration is a meaningful step forward for Korea’s innovation to reach the global stage." He added that by integrating KRW1 into Circle's Arc, they are creating new opportunities for Korean companies to engage with the global stablecoin network. Additionally, BDACS had secured the trademark for KRW1 back in December 2023, laying the groundwork for the upcoming stablecoin launch.

Top stablecoins by market cap. Source: CoinMarketCap

Arc Testnet Goes Live

The announcement of KRW1 follows the recent launch of Circle's public testnet for the Arc blockchain. In a Tuesday statement, Circle described Arc as an "Economic Operating System for the internet," meant to enhance global financial infrastructure through on-chain integration.

The testnet has garnered interest from more than 100 global institutions, including notable names such as BlackRock, Goldman Sachs, Visa, Mastercard, and State Street. Arc boasts features like predictable US dollar-based transaction fees, sub-second finality, and optional privacy settings, making it conducive for the smooth use of USDC. Stablecoin projects from Japan, Brazil, Mexico, and the Philippines are already experimenting with their national tokens on the Arc platform, and Korea's KRW1 will now add to this collaborative effort.

Critique of Bank-Led Stablecoin Initiatives in Korea

Sangmin Seo, the chair of the Kaia DLT Foundation, has taken a stance against the Bank of Korea’s (BOK) proposal to have local banks lead the charge in issuing won-backed stablecoins, labeling it “illogical.” The BOK contends that banks, due to their strict regulations regarding capital, foreign exchange, and Anti-Money Laundering (AML) protocols, could mitigate risks associated with stablecoin issuance. The central bank also proposed creating a collaborative policy body with currency and financial authorities to manage the issuers and the volume of issuance.

Seo counters this reasoning by advocating for clearer, more inclusive rules for all potential issuers—both banking and non-banking—who meet certain regulatory criteria. This would allow for a broader and more innovative approach to the stablecoin landscape in South Korea.

(Related articles include discussions on cryptocurrency payment innovations and the dynamics of the crypto market.)