Shares of Kakaopay, a South Korean digital payments company, plummeted by up to 17% on June 27. The Korea Exchange had suspended trading twice due to extreme price volatility. This followed a 50% surge in just two days. The stock had tripled in value over a month,driven by investor interest in the firm’s potential stablecoin venture.
The exchange flagged Kakaopay as an “investment risk” after the stock’s wild ride. The company’s shares had soared 50% in two days, leading to a trading halt.The stock’s sharp rise was fueled by excitement over its possible entry into stablecoins. However, regulators are now warning of the risks linked to stablecoin adoption.
Shawn Oh,an equities trader,noted that the stock was overvalued. “the market got ahead of itself,” Oh said.
Regulators are concerned about the risks of stablecoin adoption.The Bank of Korea warns of potential market instability and foreign exchange disturbances. The Bank for International Settlements also cautions that stablecoins are not a substitute for traditional money.
KakaoPay and KakaoBank have filed multiple trademark applications related to stablecoins. These moves align with legislative discussions in South Korea’s National Assembly on the Digital Asset Framework Act. If enacted, the act would allow major firms like KakaoBank and KakaoPay to issue won-pegged stablecoins.
Despite the excitement, the future role of stablecoins remains uncertain. The Bank for International Settlements notes that stablecoins may not replace traditional money. Investors should be cautious as the market evolves.
