KUALA LUMPUR: Stablecoins are becoming “unavoidable” for global and regional finance but could pose significant risks to monetary and financial stability unless ASEAN+3 economies establish strong safeguards, a central banker and an economist said.
Bank of Korea deputy governor Min Soo Kwon said stablecoins offer clear benefits such as instant global transfers, programmability and cheaper cross-border payments.
“Instead of going through multiple intermediaries, individuals could send money overseas with just a few taps on their smartphones. Faster and at a lower cost.
“As more assets are tokenised into small digital units, stablecoins could become a key means of settlement in this new environment,” he said during the second session of the 4th ASEAN+3 Economic Cooperation and Financial Stability Forum, titled ‘The Changing Global Financial Landscape: Implications for Monetary and Financial Stability’ on Tuesday.
The forum, organised by the ASEAN+3 Macroeconomic Research Office (AMRO), was held in Hong Kong.
However, Kwon said the biggest vulnerability is not the technology but the loss of trust during periods of stress, particularly when issuers are private companies operating outside the central banking framework.
He said that even the largest stablecoins have shown sudden price instability, citing the US dollar coin (USDC) de-pegging episode when the coin temporarily fell to 88 cents after its reserves were affected by the Silicon Valley Bank collapse.
“The region is vulnerable to digital age bank runs, where millions of users could redeem simultaneously with a single click, forcing issuers to liquidate assets rapidly,” he said.
Kwon also pointed to rising financial-crime risks, noting that according to the American blockchain analysis firm, Chainalysis, 63 per cent of illegal crypto transactions in 2024 involved stablecoins, raising complex regulatory challenges for capital flow management and anti-money-laundering compliance.
“Given these risks, Bank of Korea’s position is that any Korean-won stablecoin must be issued through a bank-centred model to ensure proper governance, regulatory oversight and alignment with monetary-policy objectives,” he added.
Meanwhile, chief economist for Asia Pacific at Natixis (French investment bank) Alicia García-Herrero said stablecoins can no longer be dismissed as a fringe innovation, noting that global adoption is accelerating and may already be affecting capital movement patterns across regions.
She described how stablecoins and digital-asset investment flows are increasingly sucking savings away into the US, raising concerns that Asian economies may face worsening imbalances if they lag behind in regulation and local-currency innovation.
Alicia added that Asia may have no choice but to accelerate its own regulatory frameworks and develop regional liquidity pools to prevent excessive reliance on US dollar-denominated digital assets. – BERNAMA
