On April 21, 2026, Hyun Song Shin was inaugurated as the Governor of the Bank of Korea (BOK).

His paper, BIS Working Paper No. 1335: "Tokenomics and blockchain fragmentation" (March 2026), is a seminal work that synthesizes his insights from his time as an Economic Adviser at the BIS. The perspectives shared in this paper are expected to serve as the core guidelines for the BOK's digital currency policy moving forward.

While Governor Shin was previously classified as a skeptic—having strongly criticized stablecoins for their volatility and lack of stability—his recent confirmation hearing and inaugural address suggest a shift. By advocating for "complementary and competitive coexistence," he has signaled a potential change in the outlook for stablecoins.

Based on his paper and inaugural address(source), let's predict the future direction of South Korea’s digital currency and stablecoin policies.

1. Deep Dive: "Tokenomics and Blockchain Fragmentation"

The core of the paper is an economic proof of why private, blockchain-based currencies fail to achieve the "network effects" essential to money and instead inevitably face fragmentation.

The Essence of Money: Strong Network Effects

Traditional currencies tend to converge into one due to network effects, where value increases as more people use them. However, public blockchains experience "fragmentation," where the system splits into several parts. The paper proves this is a structural limitation of blockchain.

Money is a Social Convention: Money is a coordination device based on the powerful network effect of "I use it because others use it."
Singleness: For money to hold social value, "singleness"—where everyone recognizes the same value—must be maintained.

The Economic Cost of Decentralized Consensus

The paper models the behavior of chain validators using "Global Games Theory(source)." For a blockchain to operate without a central authority, validators must be given sufficient rewards to ensure honest cooperation.

The Validator's Dilemma: To maintain security, the chain must provide high rewards to validators. The tighter the security (i.e., the more effort required from other validators), the higher the reward they demand.
Congestion Rents: Rewards are ultimately covered by user fees. High security inevitably leads to high fees and capacity limits. Blockchains must intentionally limit capacity to keep fees high enough to reward validators. This congestion is not a technical flaw but a necessary feature for the survival of decentralized consensus.

💡 Global Games Theory

A theory stating that in a world of imperfect information, beliefs about "how others will act" determine the success or failure of a system. The paper uses this to prove that coordination costs are structurally inherent in blockchains.

Fragmentation

Emergence of New Chains: When fees on a specific chain become too expensive, new chains with lower fees emerge, even if they offer slightly lower security.
- Established Chains (e.g., Ethereum): High security but high fees, leaving only institutional investors or large projects.
- Newer Chains (e.g., Solana, Tron): Lower fees and lower consensus thresholds, absorbing retail users and micro-payments.
As liquidity scatters across multiple chains, it triggers a vicious cycle that breaks the network effects which give money its value. Stablecoins inherit these fragmentation characteristics from the chains they inhabit.

Limitations of Private Stablecoins

Even if issued by the same entity, stablecoins become separate, non-interoperable assets if they run on different chains. While "bridges" are used to move between chains, they introduce security vulnerabilities, costs, and delays.

Designing the Future Monetary System

While computer science advancements can lower direct costs, Global Games Theory suggests they cannot eliminate the coordination costs arising from strategic uncertainty among people. Therefore, the paper suggests that a Unified Ledger system based on Central Bank trust is more efficient than relying solely on blockchain.

In summary, the paper argues that while decentralized technology is impressive, its function as money will likely fail due to fragmentation without a foundation of central bank trust. It advocates for a "Two-tier system" where CBDCs and deposit tokens provided by the central bank ensure the singleness of money, while private innovation flourishes on top of that foundation.

💡 Coordination Premium

Blockchain: Users must pay massive coordination costs (fees) to trust one another.
CBDC: Since the central bank's public credibility has already completed the "coordination," users do not need to pay extra.

💡 Unified Ledger

An infrastructure that hosts CBDCs, bank deposit tokens, and various digital assets on a common, programmable ledger. It aims to secure both the "singleness of money" and transaction efficiency by unifying assets scattered across different chains.

2. Future Policy Outlook for the BOK

Let’s project the direction of digital currency policy through the lens of "preventing fragmentation" and "maintaining the singleness of money."

2-1. Commercialization of Deposit Tokens (Project Hangang Phase 2)

To solve the high fees and fragmentation of private blockchains, the BOK will build public infrastructure via Institutional CBDCs and encourage banks to issue deposit tokens on top of it.

Real-Transaction Environment: Starting in the first half of 2026, a pilot program involving over 80,000 participants will test subsidy payments and P2P transfers to create a usable Digital Won environment.
Reliability: Unlike private coins, deposit tokens can be instantly converted into the central bank's CBDC, making them a perfect implementation of the "singleness of money."

2-2. Reshaping Order with "Regulated" Stablecoins

Governor Shin mentioned complementary and competitive coexistence during his hearing. However, this does not mean a "free-for-all."

Based on his paper, the BOK is likely to prioritize stablecoin issuance centered on banking consortiums with proven regulatory compliance, rather than coins based on vulnerable, fragmented public chains.
To prevent private stablecoins from fragmenting, standards will likely be introduced to allow interoperability within the CBDC infrastructure.

2-3. Internationalization of the Digital Won

In his inaugural address, the Governor emphasized the internationalization of the Korean Won. The benefits include:

Reduced dependency on the USD (exchange rate stability).
Inclusion in the MSCI Developed Markets Index (by making it easier for foreign investors to trade Won).
Creation of new revenue streams as global institutions hold Won-denominated assets.

The action items for these goals converge on the digitalization of the Won.

With the 24-hour opening of the foreign exchange market, a legal foundation (such as Phase 2 of the Virtual Asset Act) will likely be expedited to allow the Digital Won to be used as a settlement tool in offshore transactions.
To mitigate the risks of increased capital volatility mentioned in the paper, a "Macroprudential Framework" will likely be programmed into the digital currency system for real-time monitoring. By blockchaining the Won, the BOK gains a real-time ledger to track the flow of currency globally.

3. An Era of Shifting "Engines of Trust"

In conclusion, Governor Shin’s philosophy involves creating an infrastructure that technically coexists with private stablecoins while keeping the root of their value anchored in central bank trust.

Talking about "complementary coexistence" is less about a full endorsement of stablecoins and more about an intent to bring them into a regulated framework led by the BOK to manage risk. The future leadership of the KRW stablecoin will depend not just on technology, but on how well it integrates with institutional infrastructure (CBDC) and complies with regulations.

The BOK Under Hyun Song Shin: Are Stablecoins Friend or Foe?