Stony Brook University Business Management

If Galaxy Phones Become Global Wallets … Korea Could Become the Core of the Digital Currency Ecosystem

In 1971, U.S. President Richard Nixon declared the suspension of the gold standard, effectively dismantling the Bretton Woods system. At the time, the dual burdens of fiscal deficits caused by the Vietnam War and expanding welfare programs, along with current account deficits due to the oversupply of global liquidity, were key factors. This so-called "twin deficit" issue became a structural bottleneck for the U.S. economy. In the 1980s, the U.S. addressed this problem through the radical measure known as the Plaza Accord. These recurring twin deficits have since served as a critical factor intensifying tensions surrounding the U.S. dollar's hegemony — a cycle that the U.S. now finds itself trapped in once again.

The U.S. has traditionally managed fiscal deficits by issuing Treasury bonds, a practice similar to the past. However, a new development has emerged: foreign governments, including major East Asian nations, have become reluctant to purchase U.S. Treasuries. This lack of participation has forced the U.S. to face mounting upward pressure on interest rates. At this turning point, the U.S. has unveiled a new strategy: stablecoins. By institutionalizing digital assets, the U.S. aims to generate new demand for dollars among global private sectors — individuals, corporations, and fintech ecosystems. Even if foreign governments no longer buy U.S. Treasuries, this approach would encourage private actors to hold and use dollars in digital form. In doing so, the U.S. is effectively designing a new system of "digital petrodollars."

Although this strategy appears to champion decentralization and technological innovation, its underlying intention is to preserve U.S. monetary dominance. The goal is to expand the influence of the digital dollar by moving beyond foreign-exchange-reserve-based demand and fostering blockchain-based asset holdings and payments among private entities. However, this poses a fundamental threat to the monetary policy autonomy and foreign exchange regulatory tools of open economies.

In particular, the stablecoin market operates on a peer-to-peer (P2P) structure, where capital movements can occur instantaneously, often rendering traditional financial regulations ineffective. If domestic companies and individuals come to prefer holding dollar-denominated stablecoins over the Korean won as a means of preserving assets, conventional financial systems and policy tools could be rendered powerless.

Before this transformation fully takes hold, Korea must adopt a strategic perspective to address these challenges and proactively prepare for the changes that lie ahead.

Article Source: https://www.mk.co.kr/news/business/11421950