[Part 1] Hegemony of Stablecoins: Global Stablecoin Dominance and US Regulatory Reforms
[Part 2] Hegemony of Stablecoins: KRW Stablecoins at the Crossroads of Innovation and Regulation
[Part 3] Hegemony of Stablecoins: Ethereum’s 'Meta Transactions' as the Key to Cost Innovation
[Part 4] Hegemony of Stablecoins: The Future of Finance Lies in Cars and AI
[Part 5] Hegemony of Stablecoins: Why is South Korea Considering Issuing Won-Based Stablecoins?
As we begin this series
The commentary by Professor Hyoung-Joong Kim on the “Hegemony of Stablecoin Industry” marks the starting point of a series that examines the paradigm shift in markets, positioned at the heart of today’s digital finance landscape. Moving forward, we plan to incorporate more case studies and insights to deliver a more sophisticated and comprehensive outlook.
Recently, the U.S. stock market has garnered significant attention from both domestic and international investors, particularly with the listing of Circle, the largest issuer of stablecoins in the United States, on the New York Stock Exchange (NYSE) in October 2023. This move has caused considerable ripple effects across the market. As a leading player in the so-called “stablecoin hegemon,” Circle’s IPO has not only resulted in a substantial surge in its share price but also sent a dual message to the market: a reinforcement of regulatory tightening alongside a commitment to market stability.
Currently, the market capitalization of USDC exceeds $60 billion, accounting for more than 27% of the total stablecoin market. Behind this is Circle’s profit-generation structure centered on USDC. The company maintains a stable revenue base through transaction fees, operational earnings, and contracts with the U.S. Federal Reserve and domestic financial institutions. However, this foundation is also susceptible to the waves of change sweeping through the sector.
One of the most noteworthy developments is the passage of the “Genius Act” by the U.S. Senate on June 17. The act is an attempt to align the United States’ digital asset regulations with global standards. At the same time, it signals an intention to implement stricter regulatory oversight domestically. According to the bill’s provisions, if a large stablecoin issuer’s issuance volume exceeds $10 billion, it must operate under the supervision of federal financial regulators—the Federal Reserve and the Office of the Comptroller of the Currency (OCC). This is a rigorous regulatory measure initiated by the U.S., purportedly to enhance transparency and consumer protection, establishing a “firm hand” comparable to the strictest global standards.
The core of the regulation stipulates that issuers must be a subsidiary of an insured depository institution (IDI) or a federal-qualified nonbank issuer (regulated by the OCC). Paxos, for instance, received conditional approval from OCC in 2021 but has yet to secure full authorization. Similarly, Circle applied for a banking license earlier this year, but the progress remains uncertain. Experts estimate that this approval process could take over one to two years, raising concerns that it might take longer than initially anticipated.
These cases offer valuable insights for the growth of the domestic stablecoin ecosystem. Regulatory authorities are emphasizing the rapid establishment of stringent approval procedures and oversight frameworks aligned with international trends. Domestic enterprises should proactively develop strategies to adapt to the evolving regulatory landscape ahead. From the government’s perspective, there is a growing demand for clear and proactive regulatory guidelines to ensure market stability and maintain confidence in the financial system.
Experts suggest that "the global market is shifting toward a direction that involves strengthening regulations while fostering a healthy ecosystem." They emphasize that “both domestic companies and policymakers must align with this change to secure future competitiveness.”
This series represents an initial step in examining global regulatory developments and their potential impact on future market dynamics. In the next installment, we will delve into the shifting dominance of stablecoins within this emerging paradigm of digital finance and analyze the trajectory of the KRW stablecoin as it navigates the crossroads of innovation and regulation.
You can find the Korean version of this article here.
