Stablecoins: What We Should Really Be Discussing (1) Even When Dollars Flow In, It Settles in Won

Hello, I’m Junghyun Kim (a.k.a. Colin), CEO of BaeRae. Building wallets and on-chain payment infrastructure, I’m starting this series to offer a different perspective on the stablecoin conversation.

The topic of this first post is this: even if dollar stablecoins flow into Korea, in the end they can only settle in won.

Whenever the topic of a won stablecoin comes up, one worry follows almost reflexively: “Won’t dollar stablecoins pour in and eat away at the won?”

It’s not a baseless fear. More than 90% of the world’s stablecoins are dollar-based, and in emerging markets — where local currencies are shaky — people hold dollar stablecoins like a safe-haven asset. This is called “bottom-up dollarization”: dollarization driven not by central bank policy but by individual choices. In its December 2025 report, the IMF warned that dollar-pegged stablecoins could trigger currency substitution and capital outflows in emerging economies, and could bypass capital-flow management (CFM) measures (coverage here). That said, in the same coverage several experts pushed back, arguing the stablecoin market isn’t yet large enough to move macroeconomics.

In fact, this is a phenomenon that long predates stablecoins. Amid a hyperinflation crisis in 2000, Ecuador abandoned its own currency (the sucre) entirely and adopted the dollar as legal tender; today its citizens earn wages and pay rent and groceries in dollars. El Salvador followed in 2001. Zimbabwe, after hyperinflation in 2008, moved the next year to a multi-currency system including the dollar, and even now a large share of transactions happens in dollars. Argentina, since 2025, has run a bi-monetary policy letting merchants accept payment in dollars without converting to pesos. (Some cases, like Panama, came not from crisis but from a political choice — adopting the dollar right after independence in 1904.) The common thread is clear: where trust in the local currency is weak, physical dollars and dollar stablecoins alike are already used as means of payment. Stablecoins have simply made this old dollarization faster and borderless.

So most of the discussion flows toward “how do we block the inflow of dollar stablecoins” and “how do we defend with a won stablecoin.” It’s a framing of defense.

But when it comes to Korea, I think the direction of this worry is slightly mistaken.

Let’s start with a simple question. Say a foreign tourist pays for a meal at a Seoul restaurant with a dollar stablecoin. What does the restaurant owner then do with that dollar stablecoin?

The owner uses that money to pay rent, wages, ingredients, and VAT. All of this happens in won. The landlord, the staff, the food wholesaler, and the tax office do not accept dollar stablecoins. In the end, the owner has to convert that dollar stablecoin into won somewhere.

Here’s the key. The fact that the final settlement unit of domestic economic activity is the won does not change. A dollar stablecoin can be an “inflow channel” that crosses the border, but it cannot be the “settlement destination” where you buy goods and pay taxes at home. The destination is always won.

This isn’t merely a practical observation — it touches the very origin of money. There’s a long-standing view in monetary theory that “taxes drive money.” This idea, known as chartalism, holds that money didn’t arise spontaneously from the convenience of barter but is an institution created by the state. The moment a state declares “taxes will be accepted only in this currency,” a fundamental demand for that currency arises among everyone in that society. Historically, too, the most powerful tool colonies and early states used to circulate their currency was precisely “requiring taxes to be paid only in that currency.” Taxation, in other words, is the root of a currency’s demand.

Seen this way, “the tax office doesn’t accept dollar stablecoins” isn’t just a matter of inconvenience. As long as the state collects taxes only in won, anyone doing economic activity within this country must eventually hold won. Taxation props up the floor of won demand, and on top of that floor, rent, wages, and prices are denominated in won. No matter how many dollar stablecoins flow in, they cannot change this structure itself.

This is a pattern already observed in emerging markets. When a Nigerian merchant imports goods, they convert naira to USDT to send it, but the receiving side ultimately converts it back into their local currency. Multiple conversions creep into a single transaction, each incurring fees and slippage. That’s why the industry increasingly says what’s really needed is “a stablecoin denominated in the unit of account people actually use to price goods and pay taxes.” In Korea, that unit is obviously the won.

One more thing layers on top of this: the won-dollar exchange rate.

If the restaurant owner holds the dollar stablecoin as is, they are unwittingly making a currency bet. The $100 received today is left exposed, with no way of knowing what it will be worth in won tomorrow. If money earned from selling meals rises and falls with the exchange rate, that’s no longer payment — it’s speculation.

Merchants have neither reason nor capacity to bear FX risk. So even if they accept payment in a dollar stablecoin, they effectively want it settled into won immediately. Cross-border payment infrastructure firms are already targeting exactly this point. Services already exist that let merchants accept stablecoin payments but choose to be settled in local currency. “The consumer pays in stablecoin, the merchant receives local currency” — this structure is becoming the standard.

In other words, even if a dollar stablecoin is used at the moment of payment, conversion into won has to happen almost automatically behind the scenes. The dollar merely passes across the surface; what settles to the bottom is won.

And this is where it becomes clear why a won stablecoin is needed. If a won stablecoin exists, this conversion doesn’t need to leave the chain at all. A path connects smoothly as a single flow: dollar stablecoin → won stablecoin → (when needed) won. A foreigner pays in a dollar stablecoin; the merchant is instantly settled in a won stablecoin, holding or putting it to work on-chain, and only cashes out to won at the moment actual cash is needed. Without a won stablecoin, every step incurs friction moving between on-chain and off-chain; but once a won stablecoin fills that intermediate settlement layer, this three-step path connects seamlessly. (How this conversion and settlement work technically is something I’ll cover more in a later post in this series.)

This flow doesn’t arise from market forces alone. Two axes push in the same direction.

First, the government. From the standpoint of monetary sovereignty and capital-outflow management, the worst-case scenario for the government is domestic payments getting filled up with dollar stablecoins. The most desirable picture, conversely, is that even when dollars flow in, they circulate domestically after being converted into a won stablecoin. Only then is the payment flow visible and within reach of monetary policy. So from the design stage, the government will try to steer things toward “convergence on won settlement.” Requiring a local entity or license for the domestic “distribution” of foreign stablecoins — allowing trading but controlling payment and redemption, the Hong Kong-style compromise — comes from this context.

Payment providers are the same. Once the rules are built around a won stablecoin, any payment that doesn’t ride that rail becomes a target for regulation. In the end, payment providers operating domestically have no choice but to converge on the won stablecoin rail. There’s no reason to insist on a dollar rail while breaking the rules.

Market forces (merchants avoiding FX risk) and institutional forces (steering by the government and payment providers) point the same way. Both aim at “settlement in won.”

Accept this view, and how you see the won stablecoin changes.

In the common framing, a won stablecoin is “a shield against the dollar’s invasion” — defensive, somewhat reactive. But if the argument so far holds, the real role of a won stablecoin is not a shield but “the settlement rail that all domestic payments ultimately reach.” Whatever flows in — dollars or anything else — the moment it is actually used at home, it has to switch onto the won stablecoin.

This carries an important implication. The real value in the won stablecoin business isn’t the “issuance” itself, but the point that seamlessly converts between dollars and won, and holding that won settlement rail. Instead of burning energy trying to block dollar inflows, capturing the junction where incoming dollars switch into won is far more realistic — and a much bigger opportunity.

Of course, there’s a counterargument. In places where trust in the local currency has collapsed — like Ecuador or Argentina above — people refuse to settle in local currency at all and keep holding dollars (or dollar stablecoins) instead. In those countries, my logic that “at the end of every payment there is local currency” does not hold, because the unit of account itself has already shifted to the dollar.

Here’s something worth underlining. Dollarization isn’t merely a matter of the convenience of “using dollars” — it’s a bargain in which a state hands over its monetary sovereignty wholesale. When Ecuador adopted the dollar in 2000, it gained price stability and credibility, but in exchange it lost three core functions of a central bank. The seigniorage from issuing money now flows to the United States; the role of lender of last resort — printing money to rescue banks in a crisis — is gone; and so is the ability to finance fiscal deficits through money creation. Monetary policy is effectively outsourced to the U.S. Federal Reserve. For a country whose trust in its own currency has already collapsed, this can be a rational way to “import credibility” — but for a country with a sound currency, it’s a bargain there’s no reason to enter.

Korea is far from that situation. The won remains a trusted unit of account; taxes, wages, and prices are all denominated in won. So Korea has no reason to throw away its monetary sovereignty and go down the path of dollarization. Put differently, this article’s logic — “even when dollars flow in, it settles in won” — rests on the condition that “the won retains trust as a unit of account.” And in today’s Korea, that condition is solid.

That clarifies the real goal of won-stablecoin policy, too. It isn’t to block the inflow of dollar stablecoins, but to lay down a good settlement rail on which incoming dollars smoothly switch into won — and, on that foundation, to keep the won a trusted settlement unit. It’s a question of design, not defense.

In the next post, I’ll take on another common misunderstanding: the “high yield” of stablecoins. Some stablecoins advertise 5–10% annual returns, and the moment we compare that to bank deposit interest, we misunderstand it entirely. I’ll unpack what that yield actually is, and why we shouldn’t call it “interest.”

You can find my other writing on the structural shifts in blockchain, wallets, and digital assets — including the topics covered here — at BaeRae’s Substack. If you’d like to go deeper on any of these subjects or explore working together, feel free to reach out for a coffee chat anytime. Find me on X, Telegram, or LinkedIn.

This post reflects a personal view against the backdrop of the market and regulatory situation in the first half of 2026, and is not specific investment or policy advice. References: IMF warning on dollar-stablecoin currency substitution (Dec 2025), BIS analysis of dollar dominance in stablecoins, and materials on emerging-market local-currency stablecoins and merchant settlement infrastructure (2026).