[DigitalToday reporter Sangyeop Oh (오상엽)] An analysis found that stablecoins in South Korea's digital asset market have seen net outflows abroad for 18 consecutive months, with the cumulative total reaching 14 trillion won. It said South Korean investors are using dollar stablecoins as an alternative in the absence of a won-based stablecoin.

The digital asset industry said on Tuesday that blockchain oracle firm RedStone and blockchain platform Kaia recently released a report, "The Seoul Standard", with those findings.

The report said stablecoins posted monthly net outflows abroad over the past 18 months on South Korean won-based digital asset exchanges. Cumulative net outflows were tallied at $10.4 billion, or about 14 trillion won.

It said the flow has not turned to net inflows even once since the Financial Services Commission began compiling related statistics in January last year.

The report cited the absence of a won stablecoin in South Korea as a reason for the fund flows. It said dollar stablecoins are effectively serving as a substitute because local investors lack a won-based instrument they can use for trading and moving funds in global digital asset markets.

It said there would be sufficient market liquidity to support a won-based stablecoin if it is introduced.

The report said the share of won-denominated trading in global digital asset transactions is high, second only to the dollar. It said South Korea's digital asset market size and investor base suggest conditions are in place for a won stablecoin to grow.

It said South Korea's regulatory environment for digital assets has also entered a phase of change. It said relatively strict regulations, including limits on institutional participation, have been applied, but moves to link traditional finance and digital assets have been expanding since this year.

The report said institutionalising a won stablecoin remains a task to be resolved. It said enforcement of a law to institutionalise tokenised securities, or STOs, is scheduled, while discussions are still under way on the second phase of digital asset legislation and on a framework for a won stablecoin.

It pointed to regulation of the issuer as a key variable that will determine the future market structure for won stablecoins.

The report said the Bank of Korea prefers a bank-centred issuance structure, while the Financial Services Commission and the ruling party are discussing ways to allow a wider range of companies to participate in the market.

It said funding outflows abroad via dollar-based stablecoins are continuing while the institutionalisation of a won stablecoin is delayed, and that criticism is likely to emerge that capital outflows and won usage should both be considered in future domestic framework design.