[Manho Yoon's Financial Focus] Prepare in Earnest for the Era of Digital Assets

Thorough Preparation Required for Government, Corporations, and Financial Institutions
Ensuring Financial Market Stability Must Be Considered
Strengthening Information Security Capabilities Is Also Crucial

On May 14, the so-called CLARITY Act, which aims to clearly define how virtual assets should be classified as products and what regulations and supervision they should be subject to, was passed by the U.S. Senate Committee on Banking, Housing, and Urban Affairs. Following last year's passage of the GENIUS Act regarding the issuance of stablecoins, the CLARITY Act is now set to pass, prompting countries such as Korea to accelerate the institutional adoption of digital assets, signaling the dawn of the digital asset era. This article examines the concept of digital assets, the legislative processes of various countries, the outlook for stablecoin expansion, and response strategies for different economic agents.

Digital Assets: ‘Digitally recorded assets with economic value on blockchain or other distributed ledgers, enabling transfer and transactions’

Digital assets initially centered on trading virtual currencies such as Bitcoin but have since expanded into a broader concept encompassing RWAs (Real-world Assets), DeFi (Decentralized Finance), and stablecoins, generating and developing new markets. RWAs refer to the tokenization of illiquid and high-value real assets, such as real estate and artworks, thereby providing more investment opportunities to a wider range of investors. DeFi enables financial transactions such as lending and remittance directly between participants on the blockchain, without intermediary institutions like banks, and all transaction records are stored on a public blockchain. Stablecoins are issued in connection with assets like government bonds to counteract the high price volatility of traditional cryptocurrencies, resulting in much more stable prices and making them suitable for use in DeFi payments.

Legislative Processes for Digital Assets by Country

The recognition of digital assets within institutional frameworks began in 2016 when Japan amended its Payment Services Act to include virtual assets as subjects of financial regulation. After the COVID-19 pandemic, the demand for digital payments and remittances surged amid the rise of contactless environments, and as the convenience of digital assets became evident, transactions involving RWAs and DeFi lending increased, and the use of stablecoins as a means of payment expanded significantly. In Europe, the Markets in Crypto-Assets Regulation (MiCA) was enacted in May 2023, targeting EU member states as the first comprehensive institutionalization of the digital asset market. In the United States, the approval by the Securities and Exchange Commission (SEC) of spot Bitcoin exchange-traded funds (ETFs) in January 2024 marked an institutional recognition of digital asset trading in capital markets. In July last year, the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) established a regulatory framework for stablecoin issuance, and if the currently pending CLARITY Act is finally passed, the market expects 2024 to be a historic turning point where digital assets move from the ‘realm of speculation’ into ‘core infrastructure of institutional finance’. Korea also began full-scale investor protection by implementing the Act on the Protection of Virtual Asset Users in July 2024, which strengthens regulations against unfair trading and increases exchange accountability. Currently, the National Assembly is discussing the ‘Basic Digital Assets Act’, which addresses the issuance of won-denominated stablecoins, among other issues.

The Proliferation of Stablecoins and Discussion of Won-based Stablecoins

The rise of stablecoins in the growth of the digital asset market signals not just a technological trend but a complete redesign of the financial infrastructure. The existing financial system has operated within various constraints such as bank operating hours, national payment networks, and complex regulations. In contrast, stablecoins, built on blockchain technology, enable uninterrupted value transfers 24 hours a day, 365 days a year. While international remittances in the past took several days and incurred high fees, using stablecoins allows for near real-time transfers and significant cost reductions.

As discussions on the issuance of won-based stablecoins accelerate in response to the spread of dollar-based stablecoins, domestic financial institutions and platform companies are proactively preparing. This is seen as a preemptive response to enable rapid commercialization once regulatory frameworks are established in the future.

Institutional foundations are essential for the widespread adoption of won-based stablecoins. Key requirements include clarity on issuers and issuance structures, transparency in reserves, user protection mechanisms, anti-money laundering (AML) protocols, and know-your-customer (KYC) measures. Another critical reason for issuing won-based stablecoins is to secure the monetary sovereignty and digital competitiveness of the Korean won amid the rapid growth of dollar stablecoins. Korea should promptly pursue legislation for the Basic Digital Assets Act after thorough discussion, establish reliable issuance structures, and focus on building and managing an ecosystem where won-based stablecoins can be used in the market.

The Future of Finance: Increasing Proportion of Decentralization and Tokenization

As the era of digital assets approaches, the competitiveness gap is expected to widen significantly depending on how each country’s economic agents respond. Boston Consulting Group (BCG) projects that the global tokenized asset market will reach about USD 16 trillion by 2030. Such quantitative expansion of digital assets, combined with blockchain technology, Web 3.0, and decentralization, will transform the future of finance. Tokenization will become central to future currency systems. Paper money and credit card-centric structures are increasingly likely to be replaced by CBDCs (Central Bank Digital Currencies), deposit tokens, stablecoins, and tokenized securities. Finance will become more decentralized (DeFi) and tokenized, creating new forms of financial investment.

Preparation for Each Economic Agent

Governments must promptly revise laws and institutions so that digital assets can take root as sound future financial infrastructure. Rather than focusing solely on regulation, rules should be established to encourage innovation while ensuring the sustainability of digital asset transactions, thus preventing regulatory gaps. Just as the United States utilizes stablecoins as a monetary policy tool for government bond sales, Korea should consider digital assets a national strategic issue in the artificial intelligence (AI) era and prepare for the digital global competition era.

Large corporations should tokenize real assets such as real estate and intellectual property to secure new funding channels and utilize stablecoins in global B2B transactions to achieve cost savings and improve efficiency. Small and medium-sized enterprises can consider using DeFi-based token-collateralized loans in addition to traditional bank loans or issuing tokenized securities to attract small-scale investors. Individual investors should deepen their understanding of digital assets and DeFi finance and consider incorporating them into their portfolios. It is also necessary to prepare for the future normalization of inheritance and gifting based on digital assets and the everyday use of mobile digital wallets.

Changes in Financial Value Chains and Preparations for Handling Digital Asset Work

Financial institutions must also respond sensitively to these changes. Across banking, securities, and insurance sectors, digital asset-related work is expected to expand, and preemptive strategic planning is required to strengthen core competencies. For banks, traditional value chains—such as deposits, lending, remittance, and payment functions—will be affected by digital tokenization. Banks should consider issuing blockchain-based deposit tokens for real-time remittances and payments, and prepare digital asset custody services and collateral loan products. Securities firms should expand into real estate, artwork, and infrastructure investment markets by launching tokenized securities (STO) issuance platforms and developing and managing virtual asset ETF products. Insurance companies should develop cyber insurance products that cover losses from digital asset hacking and prepare to enter the DeFi-based on-chain insurance market.

Achieving Both ‘Innovation’ and ‘Stability’

The era of digital assets built on blockchain technology aims for decentralization (DeFi) or even anarchism, eliminating the need for intermediaries and pursuing maximum convenience while circumventing government or legacy financial system regulations. This is a tremendous wave of change. However, the risk of events such as coin runs and potential systemic financial collapses cannot be left solely to private innovation. Therefore, ensuring the stability of financial markets to prevent market failures that may arise during the expansion of digital assets must be carefully considered in the legislative process. Building APIs to connect blockchain infrastructure with existing systems and enhancing information security (cyber security) capabilities such as hacking prevention are also crucial. As the age of digital assets rapidly approaches, the future of finance will depend on how well Korea establishes robust institutional infrastructure and how economic agents discuss, collaborate, and prepare for activation strategies. Remember: in the digital asset era, the polarization between those who prepare in advance and those who do not will only intensify.

Manho Yoon, Financial Columnist (former President of KDB Financial Group)

This content was produced with the assistance of AI translation services.