Political tensions have escalated in South Korea as presidential candidates and their supporters engage in a heated debate over stablecoins, which have become a pivotal issue in the country’s electoral landscape.
On May 8, Lee Jae-myung, the leading candidate from the Democratic Party, emphasized the urgent need to establish a won-based stablecoin market in South Korea. He warned that the country must “quickly enter the stablecoin market” to avoid potential outflows of national wealth.
Korea’s major conservative party experienced one of its most chaotic weekends, attempting and failing to replace its presidential candidate within a single day. https://t.co/05W70jtJKm
— The Korea JoongAng Daily (@JoongAngDaily) May 11, 2025
However, Lee Jae-myung’s assertions have drawn stern criticism from Lee Jun-seok, the Reform Party candidate. The Digital Daily quoted Lee Jun-seok as stating, “Lee Jae-myung’s views on economics are always dangerous and experimental. He irresponsibly proposes unverified ideas while lacking a genuine understanding of market dynamics.”
The Stablecoin Controversy Among Candidates
Lee Jun-seok further pointed out that South Korean investors have previously suffered losses due to a KRW-pegged stablecoin, KRT, which was integral to the Terra-Luna fiasco. Posting on social media, he remarked, “South Korea has firsthand experience with a won-pegged stablecoin that ultimately failed during the Terra-Luna incident.”
The collapse of the Terra ecosystem in May 2022 saw stablecoins lose their pegs, significantly impacting global cryptocurrency markets and affecting thousands of South Korean investors. Lee Jun-seok elaborated, “Terra’s KRT began as a stablecoin pegged 1:1 to the Korean Won, but it lacked sufficient assets to back it. Instead, operators relied on the volatile sister coin, LUNA (now LUNC), leading to catastrophic results.”
Continuing his critique, he stated, “The failure of the market led to a drastic drop in LUNC’s value and all of Terra’s coins, including KRT, collapsed, rendering the term ‘stable’ in stablecoin utterly meaningless.”
PPP’s credibility wanes after an unsuccessful attempt to replace its presidential candidate. https://t.co/Ms0GOwKHeC
— The Korea Times (@koreatimescokr) May 11, 2025
Questions of Collateralization
Lee Jun-seok criticized Lee Jae-myung for advocating the creation of a KRW stablecoin without addressing what asset collateral would support it. He expressed concern that the Democratic Party candidate had yet to provide details on how the coin would manage market risks and prevent repeating past mistakes.
A former leader of the ruling People Power Party (PPP), Lee Jun-seok founded the Reform Party in January 2024 after parting ways with the PPP. He has declined calls from PPP leadership to rejoin the party in the lead-up to next month’s election.
In defense of Lee Jae-myung, supporters took to social media to counter Lee Jun-seok’s claims, including former Democratic Party lawmaker Kim Byeong-wook. He asserted that Lee Jun-seok’s views were “out of touch” with international regulatory trends, citing an increasing global consensus that “algorithm-based tokens are too volatile to be categorized as stablecoins.”
Polls indicate a favorability towards the opposition in South Korea, with Lee Jae-myung winning a resounding primary victory in late April. However, legal challenges may affect his candidacy, as noted by @Doug_Bandow. https://t.co/UnyFZQ8ALP
— Foreign Policy (@ForeignPolicy) May 6, 2025
Kim emphasized that regulatory bodies from Washington to Brussels and Tokyo share this perspective, arguing, “Structures similar to those used by Terra are not viable. Contemporary discussions are centered around collateralized stablecoins backed 1:1 with cash and government bond deposits to ensure real-time reserve disclosures and immediate redemption obligations.”
A Continued Exchange of Arguments
Kim accused Lee Jun-seok of incorrectly grouping algorithm-based stablecoins with collateralized ones, suggesting that Lee’s conclusion—that the failure of Terra suggests the danger of stablecoins—was overly simplistic. “If he had taken the time to understand basic global financial regulation, he would not have made such sweeping generalizations,” he added.
Moreover, Kim argued that won-pegged tokens could significantly reduce international remittance costs and stimulate the domestic digital economy.
An anonymous official from a local cryptocurrency exchange welcomed the ongoing discussions about stablecoins and broader cryptocurrency-related issues, stating, “It is encouraging to witness politicians engaging in various technical debates about virtual assets that have not previously been publicized. We are optimistic about a potential institutional reorganization in the crypto sector following the impending elections.”
As South Korea prepares for the polls on June 3, PPP’s candidate Kim Moon-soo recently promised to enable national pension and sovereign wealth funds to invest in cryptocurrencies, such as Bitcoin (BTC).
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