Kakao Pay Enters Stablecoin Race as President Lee Jae Myung Pushes Crypto Integration

Since President Lee Jae Myung took office, South Korea's cryptocurrency industry has witnessed significant new developments. Kakao Pay's entry into the KRW-backed stablecoin market and the Financial Services Commission's (FSC) roadmap for approving spot cryptocurrency ETFs reflect this shift.

Lee's relatively crypto-friendly stance is gradually taking shape, with the FSC's roadmap aligning with his election promise to foster innovation and integrate digital assets into the country's financial ecosystem.

Strengthening Institutional and Retail Participation

Kakao Pay, a dominant player in South Korea's fintech sector, has filed 18 trademark applications for KRW-backed stablecoins, such as "KRWKP" and "KPKRW," covering financial transactions, electronic transfers, and brokerage services.

This move signals the company's ambition to establish a foothold in the stablecoin market, potentially targeting its 40 million registered users as a primary audience. With South Korea's mobile payment penetration rate exceeding 85%, Kakao Pay's initiative could rapidly popularize KRW-backed stablecoins among retail users.

On the regulatory front, the FSC's roadmap to approve spot crypto ETFs aligns with President Lee Jae Myung's broader vision to integrate digital assets into the traditional financial system.

The roadmap includes measures to enable institutional investors to trade cryptocurrencies, a move that could unlock significant capital inflows. As of late 2024, South Korean institutions and retail investors held approximately 104 trillion won ($75.7 billion) worth of cryptocurrencies, highlighting the market's scale and potential for growth.

A Growing Crypto Economy

South Korea ranks among the world's largest cryptocurrency markets, with over 30% of its population—approximately 15.59 million people—actively investing in digital assets, according to recent reports. The country also boasts one of the highest internet penetration rates globally, at 96%, which has facilitated the rapid adoption of blockchain technologies and digital currencies.

The nation's cryptocurrency market is valued at $75.7 billion, with major exchanges such as Upbit and Bithumb leading the industry. Notably, younger demographics, particularly those in their 20s and 30s, dominate the investor base, reflecting a tech-savvy population.

The introduction of KRW-backed stablecoins and spot crypto ETFs is anticipated to redirect a significant portion of these holdings into regulated financial products.

Strategic Policy Shifts and Market Expansion

The FSC's plans to lift the domestic ban on crypto ETFs and extend Korea Exchange's trading hours from 6.5 to 12 hours, aiming to enhance market liquidity and attract both domestic and international investors.

The move to extend trading hours aligns with global standards, making South Korea's financial markets more accessible to foreign participants.

Additionally, the FSC's roadmap includes provisions to establish a KRW-based stablecoin market. President Lee Jae Myung has emphasized the importance of such a market in preventing capital outflow and supporting domestic economic stability. The FSC is also reviewing policies to liberalize cross-border crypto transactions, potentially positioning South Korea as a hub for international cryptocurrency trading.

Competitive Dynamics in the Stablecoin Market

Competition in the KRW-backed stablecoin market is intensifying. Game developer Nexsus has announced its intention to become the first issuer, adding to the competitive landscape.

As of now, South Korea's stablecoin market remains untapped, but with Kakao Pay and Nexon entering the fray, the sector is poised for rapid growth. Analysts predict that the introduction of KRW-backed stablecoins could facilitate seamless cross-border payments adoption.