The regulatory game in South Korea is heating up! Kakao plans to launch a KRW stablecoin, with Kaia becoming the core battlefield.

South Korean tech giant Kakao is accelerating its entry into the stablecoin market, planning to launch a digital currency pegged to the KRW through the Kaia Blockchain. Kaia has recently registered multiple trademarks related to KRW with the Korean Intellectual Property Office, including "KRWGlobal," "KRWGL," "KRWKaia," and "KaKRW."

However, there is a heated debate within the South Korean National Assembly regarding the regulation of stablecoins, involving core issues such as licensing systems, reserve ratios, interest payments, and the role of banks, which will directly affect whether Kakao's issuance plan can be realized.

Strategic Layout of Kakao and Kaia

Kaia is a public blockchain formed by the merger of Klaytn and Finschia, with both Kakao and Kakao Pay as members of its governance committee.

According to Sangmin Seo, chairman of the Kaia DLT Foundation, the future KRW stablecoin will be directly integrated into the Kakao ecosystem's mobile applications, covering over 49 million monthly active users in South Korea, and has the potential to become a bridge connecting other fiat stablecoins such as the US dollar and Japanese yen.

Kakao stated that this will allow users to access DeFi protocols in a familiar application environment, promoting the implementation of decentralized finance in South Korea.

Korean Legislative Game: Intensified Party Rivalry

The ruling party and the opposition party in South Korea recently submitted competing stablecoin bills:

Democratic Party version: Establish comprehensive regulatory rules for KRW-pegged stablecoins, clearly prohibiting the payment of interest.

The version of the National Power Party: Interest payments are not prohibited, but full reserve support is also required, and regulatory authorities are granted emergency intervention rights.

In addition, the Bank of Korea recommends that stablecoins be issued by banks first and studies the feasibility of issuing deposit tokens on a public Blockchain. These discrepancies indicate that there is still a high degree of uncertainty in the final regulatory framework.

Regulatory Challenges: Foreign Exchange Controls and Application Scenario Limitations

Min Jung, a senior analyst at the quantitative trading company Presto, pointed out that the biggest challenge for the KRW stablecoin is the "lack of clear application scenarios compared to the USD stablecoin."

South Korea's strict capital control system restricts cross-border payments and overseas usage. Foreign exchange transactions must go through cumbersome approval and documentation processes, which may limit the KRW stablecoin to domestic transactions in the early stages, making it difficult to leverage the advantages of cross-border settlement.

Jung emphasized that to unlock the true value of stablecoins, it is necessary to address the friction caused by capital controls, especially in the realm of international payments.

The Role of Central Banks and Banks

The Governor of the Bank of Korea, Lee Chang-yup, will meet with the heads of major commercial banks this month to discuss whether to allow the issuance of KRW stablecoins.

According to government plans, relevant companies must complete sign up before the second half of 2025 and submit monthly reports to the central bank. This means that Kakao's KRW stablecoin plan can only officially launch after the compliance framework is established.

Conclusion

The Korean won stablecoin launched by Kakao through Kaia may become a significant turning point in the South Korean digital asset market. However, legislative differences, foreign exchange controls, and regulatory uncertainties will determine whether this plan can be successfully implemented. For investors and the industry, the legislative progress and central bank decisions in the coming months will be crucial in observing whether the Korean won stablecoin can be successfully issued. For more updates on the Korean cryptocurrency market and stablecoin regulations, please follow the official Gate platform.