China’s central bank is officially souring on stablecoins, South Korean legislators want their government to resolve the stablecoin impasse, and stablecoins are coming to your PlayStation.
On November 28, the People’s Bank of China (PBoC) reported on its latest meeting of “the coordination mechanism for combating speculation in virtual currency trading.” This marked the first time the PBoC has discussed the minutes of a crypto-focused meeting, at which attendees included representatives of most of China’s legal and financial regulatory/enforcement agencies.
The PBoC said the represented agencies had “earnestly implemented” the 2021 government order on ‘Further Preventing and Handling Risks of Virtual Currency Trading and Speculation,’ achieving “significant results.” However, “virtual currency speculation has resurfaced, and related illegal and criminal activities have occurred from time to time, posing new challenges and new situations for risk prevention and control.”
The statement reiterated the government’s view that “lack legal tender status and should not and cannot be used as currency in the market. Virtual currency-related business activities constitute illegal financial activities.”
The PBoC went on to say that stablecoins “currently cannot effectively meet requirements for customer identification and anti-money laundering, posing a risk of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border fund transfers.”
The PBoC urged all attendees to bolster their efforts to “uphold the prohibitive policy,” to “persistently crack down on illegal financial activities related to virtual currencies,” and to “severely” make life miserable for crypto criminals.
The Chinese Communist Party’s rhetorical statements can be tricky to parse, but its attitude toward digital assets, including stablecoins, leaves little room for interpretation. This announcement is the first to officially declare stablecoins to be equally tainted by illegal activity, leading one analyst to declare that the PBoC had “erased any ambiguity, speculation and illusions” regarding its stablecoin outlook.
The PBoC’s negative stablecoin comments, which began shortly after Hong Kong’s Stablecoin Ordinance took effect in August, have put a chill on the special administrative region’s efforts to explore the use of stablecoins in local commerce. Digital asset firms listed on Hong Kong’s stock exchange ;took a pounding on Monday from the opening bell, even as the broader market rose.
Hong Kong planned to issue its first stablecoin-issuing permits early next year, but that timeline may no longer be attainable. One analyst warned that you shouldn’t expect to see Hong Kong-based offshore yuan stablecoin projects “within the next one or two years … as that conflicts with the current tone.” Applicants will also have to “carefully reconsider” whether their proposed use cases might “touch mainland China issuers and users.”
At the same time, China remains supportive of its central bank digital currency (CBDC), the digital yuan. While primarily intended for use by mainland residents, China continues to promote the expansion of an official ‘offshore’ digital yuan to boost use of the yuan in overseas markets, particularly those linked to China’s Belt & Road Initiative.
South Korean legislators demand solution to stablecoin impasse
While China retreats, South Korea is trying to forge ahead with plans to approve stablecoin legislation early in the new year. On December 1, Maeil Business Newspaper reported that South Korea’s government is attempting to resolve an impasse between the Bank of Korea (BoK) and the Financial Services Commission (FSC) regarding who will play what role in a regulated stablecoin market.
The FSC wants nonbanks to be able to participate in KRW-backed stablecoin issuance, but the BoK says this violates laws prohibiting private firms from owning financial institutions. The BoK also has concerns that tech giants will use in-house tokens to further solidify their positions at the center of online commerce, thus limiting competition.
South Korea’s government has now reportedly met with opposition parties to hammer out a compromise. A proposed solution would allow banks to hold a controlling stake in a stablecoin-issuing consortium while still allowing private firms to participate.
The report quoted Democratic Party of Korea (DPK) lawmaker Kang Joon-hyun saying the government has been tasked with crafting a formally revised proposal by December 10. Given the scope of the task, Kang conceded that “the actual discussion is likely to continue until January as the government and opposition parties need to coordinate.”
But the FSC subsequently released a statement saying “nothing has been decided regarding the formation of a consortium to issue a won-denominated stablecoin.” The FSC said it “agreed to quickly prepare a government bill and support legislative discussions in the National Assembly,” but no “specific decisions regarding stablecoin issuers” have been made.
Despite this uncertainty, South Korean media is already hyping a head-to-head stablecoin fight between tech giants Naver Corp (NASDAQ: NHNCF) and Kakao (KSE: 035720.KS).
Naver recently acquired the country’s leading exchange, Upbit, through a merger with Dunamu Inc. and is said to be prepping a stablecoin wallet service. Naver wants to link its Naver Financial unit with Upbit, a link that analysts suggested is “clearly advantageous” in the looming fight for ‘won-denominated stablecoin supremacy.’
But Kakao has its own payments platform (Kakao Pay) and neobank (KakaoBank) as well as the country’s dominant messaging platform (Kakao Talk). Kakao recently enlisted all three units into a stablecoin task force to prepare for the upcoming battle. In the wake of Naver’s Upbit deal, Kakao is rumored to be looking to acquire local digital asset exchange Coinone, which already has ties to Kakao Bank.
Last week, the Newspim financial media site reported that Kakao had begun recruiting developers for “designing new blockchain-based service structures, managing keys, and building transaction processing systems.” The plan reportedly includes a KRW-backed stablecoin informally dubbed ‘Kakao Coin.’
This summer, KakaoBank filed stablecoin trademark applications for BKRW, KRWB, KKBKRW, and KRWKKB (variations on KRW and the bank’s acronym KKB) in what it called a “pre-emptive move.” Kakao Pay recently filed six of its own applications.
Stablecoin trademark applications were also filed by Kaia, the blockchain project formed last year after Kakao merged its Klatyn network with Finschia, a project by Japan’s LINE messaging platform (which ironically had backing from Naver). In September, Kaia and LINE announced Project Unify, a “stablecoin-powered Web3 super-app” that will incorporate stablecoins in multiple currencies when it officially launches next year.
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Israel central bank wants to have it both ways
On December 1, Bank of Israel Governor Amir Yaron delivered a keynote address at a payments conference in Tel Aviv, discussing the need to modernize Israel’s payment infrastructure. Yaron said the government’s plans to issue a digital shekel remain under consideration, with the head of that project, Yoav Soffer, sketching out a ‘roadmap’ for further consideration of the CBDC in 2026.
Yaron claimed that the digital shekel will represent “a direct bond of the central bank, therefore a completely risk-free instrument,” in contrast to privately-issued stablecoins. As for those risky private tokens, Yaron acknowledged that consumer adoption means stablecoins could no longer be considered “a marginal phenomenon.”
Yaron said stablecoins would come under the supervision of the Financial Markets Authority (FMA). However, should any stablecoin come to represent ‘systemic’ importance to the Israeli economy, it would come under the supervision of the central bank.
Similar ‘systemic’ concerns have been voiced by other central bankers, including the Bank of England (BoE), which will require ‘systemic’ issuers to hold 40% of their fiat reserves in unremunerated BoE accounts. The European Union’s Markets in Crypto Assets (MiCA) regulations impose even more restrictive reserve requirements, requiring systemic stablecoins to park 60% of reserves in cash in local banks.
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VISA targets CEMEA with Aquanow
Among the private interlopers bringing allegedly risky stablecoins to the Middle East is none other than Visa (NASDAQ: V), which just struck a deal with liquidity/infrastructure solution firm Aquanow to expand its stablecoin settlement capabilities across the Central and Eastern Europe, Middle East, and Africa (CEMEA) region.
Visa’s CEMEA head of product and solutions, Godfrey Sullivan, called the tie-up “another key step in modernizing the back-end rails of payments, reducing reliance on traditional systems with multiple intermediaries, and preparing institutions for the future of money movement.”
The announcement took pains to mention how Visa’s network of issuers and acquirers in these markets will be able to settle transactions using “approved stablecoins such as USDC.” USDC is issued by Circle (NASDAQ: CRCL), with which Visa first partnered five years ago this month.
By 2021, Visa had begun trials of allowing its partner companies to settle payments in USDC. By 2023, Visa was ready to expand that USDC settlement pilot to merchant acquirers Worldpay and Nuvei. Visa said last week that the monthly volume of these settlements had passed a $2.5 billion annualized run rate.
The Visa-USDC link shows no signs of slowing its expansion to other payment channels. Last month, Visa announced a pilot program to enable businesses/platforms to send payouts directly to customer wallets using stablecoins, like (surprise!) USDC.
But Visa isn’t putting all its stablecoin eggs in USDC’s basket. Visa CEO Ryan McInerney recently used his company’s Q4 earnings call to declare that the company was “adding support for four stablecoins, running on four unique blockchains, representing two currencies.” (McInerney played coy regarding the identity of those stablecoins, possibly because a jealous Circle CEO, Jeremy Allaire, was standing behind him, clutching a rolling pin.)
McInerney said, “The areas where there’s product market fit for stablecoins in the world are the areas where there’s significant [total addressable markets] and largely where we’re underpenetrated. And that’s emerging markets. And that’s cross-border money movement … We have targeted a significant portion of our product roadmap to capture that opportunity.”
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Sony Bank launching stablecoin with Bastion
This summer’s signing of the stablecoin-focused GENIUS Act into law by U.S. President Trump led to a mad scramble of corporate entities trying to determine whether they should consider seeking federal approval to issue their own stablecoin.
On Monday, Nikkei Asia reported that Sony Bank, a spinoff of the Sony electronics entertainment giant, is gearing up to issue a dollar-denominated stablecoin for use in the broader Sony ecosystem. This includes paying for video games, subscriptions, and other content that customers currently obtain via credit cards.
In October, Connectia Trust, a Sony Bank subsidiary, filed an application for a U.S. bank charter with the U.S. Treasury Department’s Office of the Comptroller of the Currency. Connectia’s application included a reference to the potential for issuing dollar-pegged stablecoins (yes, they used the plural form).
The day the Nikkei report was issued, Sony Bank announced a ‘strategic relationship’ with Bastion, a U.S.-based stablecoin infrastructure venture. Sony Ventures is an investor in Bastion, along with some of the usual suspects (Coinbase Ventures, Andreessen Horowitz, Samsung Next, and Hashed).
Bastion will serve as Sony Bank’s sole stablecoin issuance provider, while also handling reserve management and custody at scale. Together, they will provide Sony Group affiliates with stablecoin services.
Sony Bank hopes to launch its new stablecoin early next year, helping the rest of the Sony empire pad its bottom line by eliminating the need to pay credit card fees. U.S. customers accounted for 30% of Sony’s sales to external customers in the fiscal year that ended in March, so there’s definitely savings to be had.
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Source: https://coingeek.com/china-turns-against-stablecoins-sony-preps-playstation-stable/
