Korean Card Firms Test Stablecoin Payments as Freeze Powers Loom
As South Korean card companies expand stablecoin payment pilots, the power of foreign issuers to freeze assets is emerging as a new issue to examine.
South Korean card companies are expanding stablecoin-based payment projects, and the ability of overseas issuers to freeze assets is becoming a new point of scrutiny.
The issue gained attention after a suspected hack at the global exchange Binance on October 29 (local time), in which more than $5.7 billion in crypto assets appear to have been stolen. The haul included stablecoins issued by Tether and Circle. After the incident, the issuers froze related assets, which showed again that an issuer can control token transfers independently of an exchange.
Issuer powers are written into the terms
Circle's USDC terms explicitly give it the authority to restrict transfers involving specific blockchain addresses. Even if a user holds enough stablecoins, transfers can be blocked once that address is frozen. That means companies using externally issued stablecoins for payments need to factor in the issuer's freezing authority.
Card companies are in proof-of-concept stage
Domestic card issuers are running proofs of concept for stablecoin payment and settlement. The tests cover paying with a customer's stablecoins and then settling with merchants in real time. Hana Card signed a business agreement with Circle last December and, on the 1st of this month, a three-way agreement with Hana Bank and Tether, drawing up plans to widen the uses of foreign-issued stablecoins.
It is hard to tell from public information what exception-handling features each company has built in.
A financial industry official said safeguards such as asset freezing and related control systems will need review ahead of a full-scale rollout. The official added that these provisions appear in global rules, including those in the United States, and that the company is reviewing them internally as essential for introduction into South Korea's regulated system.
If stablecoin payments spread across the card industry, a shared challenge will be how to link foreign issuers' control powers with the responsibilities of domestic payment operators.
