South Korea’s push to establish a domestic stablecoin market gained momentum with the launch of a new won-linked digital token, even as regulators continue to define the framework for such assets and an internal debate persists over their issuance.
Decentralized financial intelligence company IQ, in collaboration with the Frax protocol, announced the introduction of KRWQ, a stablecoin pegged to the South Korean won. The asset is built on Coinbase’s Layer 2 Ethereum network, Base, and has commenced trading against the U.S. dollar-pegged stablecoin USDC on Aerodrome.
KRWQ is designed to be the first multi-chain won-backed stablecoin, leveraging LayerZero’s Omnichain Fungible Token standard and the Stargate bridge to facilitate transfers across various blockchain networks. The developers stated the project was conceived in anticipation of new stablecoin legislation currently under discussion in South Korea’s National Assembly.
Despite its linkage to the won, KRWQ is not presently available to residents of South Korea. This restriction is due to the country’s ongoing efforts to develop a formal regulatory framework for stablecoins.
IQ founder Navin Vethanayagam highlighted that the new asset “fills a critical gap in the market.” He noted the dominance of U.S. dollar-backed stablecoins and the prior absence of a credible won-linked stablecoin launched at scale.
The stablecoin is primarily targeting eligible institutional entities, including exchanges, market makers, and financial partners. IQ plans to utilize Frax’s experience in regulatory compliance, drawn from its frxUSD stablecoin, to structure KRWQ in a manner that promotes institutional adoption and robust due diligence.
The launch follows South Korea’s increased focus on creating a local stablecoin market anchored to its national currency, a strategic move aimed at bolstering monetary sovereignty in the era of digital finance. President Lee Jae Myung, elected in June and known for his pro-crypto stance, has championed this initiative.
Other projects are also emerging, such as BDACS’s KRW1, a won-linked stablecoin on the Avalanche network, though it remains in a proof-of-concept phase due to regulatory uncertainties. Banks and private institutions are actively preparing their own digital currency initiatives, seeking partnerships within the ecosystem.
A key point of contention in South Korea involves who should be authorized to issue stablecoins. The Bank of Korea argues that issuance should be limited exclusively to regulated banks. Conversely, the private sector contends that non-banking firms should also be permitted to participate, advocating for increased innovation and competition.
The emergence of KRWQ underscores the intensifying competition surrounding the digitization of the won. This development could significantly reshape South Korea’s financial market and its engagement with global decentralized finance.