South Korea is actively laying the groundwork for its digital currency future. The Bank of Korea recently proposed the creation of “deposit tokens”—stablecoins backed by the Korean won and issued in collaboration with private banks. These tokens would operate on public blockchains but remain under the central bank’s supervision, offering a hybrid approach that safeguards monetary sovereignty while enabling innovation.
The urgency behind the proposal is clear. In the first quarter of 2025 alone, South Korean exchanges sent $40.6 billion worth of digital assets abroad. Nearly half of that—around $20 billion—was in U.S. dollar-backed stablecoins like USDT and USDC. The proposed deposit token aims to curb this capital outflow by providing a compliant, won-denominated alternative.
Bank of Korea Deputy Governor Lee Jong-ryeol emphasized the national interest at stake, cautioning that “unchecked stablecoin use” could undermine Korea’s financial controls. He outlined a future where public-sector tokens and privately issued stablecoins coexist under strict regulatory oversight. “We are considering a direction in which [the deposit token] will coexist within the entire digital currency system in conjunction with stablecoins issued by the private sector,” Lee said.
Several major Korean banks are reportedly forming a consortium to build this government-approved stablecoin, while lawmakers push for legislation that defines reserve mandates and verification standards. But as Seoul maps out its approach, another country is already putting these principles into practice.
Halfway across Asia, the vision South Korea is pursuing is already being put into practice in Kyrgyzstan. There, A7A5—a ruble-pegged stablecoin backed by fiat reserves—is operating under the country’s national licensing regime. Though privately issued, it adheres to state-defined rules and recently underwent an audit by Kreston, a globally recognized accounting firm.
As such, the transparency and regulatory oversight demonstrated by Kyrgyzstan’s model may set a precedent for countries looking to balance financial sovereignty with innovation in the digital currency space.
A7A5: A sovereign Stablecoin In Action
Launched in early 2025, A7A5 is a ruble-pegged stablecoin issued by Kyrgyz fintech firm Old Vector under the country’s national digital asset framework. The token’s issuance was conducted under regulatory oversight and delivered through a licensed broker.
In May, Kreston Bishkek—a licensed audit firm and member of the Kreston Global network—published a report verifying that all circulating A7A5 tokens are fully backed by Russian rubles held in reserve. Minting is allowed only after fiat deposits are confirmed, and reserves are audited quarterly and reported weekly.
This structure contrasts with many stablecoin giants that have delayed full audits. A7A5 positions itself as transparency-first, offering real-time updates and regulatory disclosures.
Its design also includes a yield mechanism: interest earned on ruble reserves—currently exceeding 20% due to Russia’s central bank rate—is shared with users. Half is distributed daily via smart contracts that adjust wallet balances; the other half is retained for operations and reserve reinforcement. For users, A7A5 aims to be more than just a stable store of value—it’s structured to combine stability with real financial growth.
Legal Structure And Transparency
A7A5 is one of the first tokens launched under Kyrgyzstan’s Law on Virtual Assets, passed in 2022 and implemented in 2023. This regulatory framework includes mandatory fiat backing, quarterly audits, and legal protections for token holders.
The project is licensed domestically and trades on the Meer Exchange—a regulated Kyrgyz platform that enforces full KYC onboarding and AML policies comparable in rigor to those found in major Western jurisdictions.
“What Kyrgyzstan has done is show that a stablecoin can be innovative and yield-bearing, but still operate under real regulatory scrutiny,” said a spokesperson for the project.
While relatively modest in size, with a circulating supply of roughly $140 million, A7A5 demonstrates that a nationally regulated stablecoin can function effectively—and earn credibility beyond its borders.
South Korea and Kyrgyzstan: Two Models, One Thesis
South Korea’s proposed deposit tokens share clear similarities with A7A5’s framework: private-sector issuance, public oversight, fiat backing, and potential blockchain interoperability. The difference? Korea is still planning. Kyrgyzstan has already executed.
While Kyrgyzstan’s model is still in early stages, it offers practical insights for South Korea’s roadmap:
Compliance and Transparency
A7A5 prioritizes transparency through weekly reserve disclosures and quarterly third-party audits—practices that build user trust and regulatory confidence. South Korea could adopt a similar auditing cadence to instill early credibility in its deposit tokens.
Reserve Verification
A7A5’s reserves are backed 1:1 with fiat and confirmed before token issuance. This approach to verifiable collateral ensures solvency and stability—an essential principle for any national digital currency framework.
Yield Considerations
Unlike most stablecoins, A7A5 offers yield derived from fiat bank interest, distributed automatically via smart contract. While South Korea’s recent rate cut (May 28) lowers potential returns, even modest yields could make deposit tokens more attractive than zero-interest alternatives.
Regulatory Design
Perhaps the most important takeaway lies in how Kyrgyzstan integrated its stablecoin into an enforceable legal framework from day one. A7A5 is licensed under the country’s 2022 Law on Virtual Assets, illustrating how compliance doesn’t need to stifle innovation. South Korea, facing a more complex regulatory environment, will need to balance financial oversight with market functionality.
The two countries may be at different stages, but their direction is aligned: stablecoins don’t have to undermine monetary control—they can strengthen it. When designed with regulatory alignment and transparency in mind, as A7A5 demonstrates, sovereign-compliant stablecoins can support national goals without compromising innovation.
As South Korea moves from concept to implementation, Kyrgyzstan’s experience offers a rare real-world test case—one worth watching closely.
Disclosure: Insider Monkey doesn’t recommend purchase of any securities/currencies. Insider Monkey received compensation to publish this article. We don’t guarantee the accuracy of the statements made in this article. Insider Monkey and its principals are not affiliated with the client and have no ownership in the client. Insider Monkey doesn’t recommend the purchase/sale of any securities, cryptocurrencies, or ICOs. Please get in touch with a financial professional before making any financial decisions. You understand that Insider Monkey doesn’t accept any responsibility and you will be using the information presented here at your own risk. You acknowledge that this disclaimer is a simplified version of our Terms of Use, and by accessing or using our site, you agree to be bound by all of its terms and conditions. If at any time you find these terms and conditions unacceptable, you must immediately leave the Site and cease all use of the Site.
