An analysis suggests that improving the short-term government bond issuance system is essential for introducing a won-based stablecoin. Currently, there are concerns that Korea does not issue government bonds with maturities less than one year, which constrains the acquisition of reserve assets for stablecoins.
Kim Pil-gyu, a senior researcher at the Korea Capital Market Institute, said on the 11th at an issue briefing on 'Stablecoins and Short-term Government Bonds' held at the Financial Investment Center Building in Yeouido, Seoul, "While discussions about won-based stablecoins are active in line with the enactment of the GENIUS Act and the expansion of dollar stablecoin issuance in the United States, the absence of short-term government bonds could become a stumbling block."
The United States and the European Union (EU) mandate high-liquidity, risk-free assets such as short-term government bonds as reserve assets to ensure the stability and redemption of stablecoins. Major global stablecoins like Tether (USDT) and USD Coin (USDC) also mostly hold short-term government bonds. However, in Korea, short-term government bond issuance is not occurring due to parliamentary approval regulations based on total issuance amount under the National Finance Act.
Alternative options such as transitional government bonds, fiscal notes, and monetary stabilization bonds have limitations in terms of supply scale and liquidity. Particularly, fiscal notes have a full redemption obligation by the end of the year, and monetary stabilization bond issuance is declining. The researcher emphasized the need for system improvement, stating that "Korea is the only country with a developed bond market that does not issue short-term government bonds."
He proposed amending the National Finance Act to change the bond issuance limit standard from 'total issuance amount' to 'net increase' or 'balance', and to first introduce one-year short-term government bonds and then expand to three and six-month bonds. He also added that market efficiency should be improved through discount bond issuance and yield curve refinement.
The researcher predicted sufficient domestic and international demand for short-term government bond issuance. He cited reasons such as the shortage of short-term investment products like money market funds (MMF), cash asset holdings by the National Pension Service and institutions, and foreign investors' liquidity-focused investment tendencies. He said, "Foreign investors also prefer bonds that can be immediately sold when needed," and that short-term government bonds would have a positive impact on market liquidity beyond just reserve assets.
