JPYC, a yen-pegged stablecoin, has been listed on Upbit, South Korea's largest cryptocurrency exchange, for only five days. But as the number of places to spend it in Korea grows and demand for a yen stablecoin becomes clearer, concerns are mounting that it could become another channel for capital to flow out of the country, following Tether (USDT).
JPYC offers cashback worth up to 15% when used to pay at partner clinics in Korea, including plastic surgery practices. With no legal framework yet in place even to issue a won-based stablecoin, the yen coin is drawing users at home and abroad on the strength of such perks.
According to financial industry sources on the 21st, Unify, a mini-app inside the Line messenger, offers a JPYC deposit service. Users who hold JPYC in a Unify wallet automatically earn 2% annual interest, paid daily, with no maturity date and no penalty for early withdrawal. There is no deposit cap. When the service launched, a promotional event paid interest of as much as 5% a year.
The range of places to spend JPYC in Korea is also broad. Through Unify, users can buy discounted mobile gift cards for popular Korean brands such as Olive Young, Daiso, CU and emart24. A 50,000-won Olive Young mobile gift card, for example, listed at 5,663 yen as of the 21st, can be bought for 4,842 yen — up to 15% cheaper — once discounts and cashback are applied.
Beyond gift cards, JPYC can also be used to pay for domestic services such as medical treatment. Users who book an appointment at a Unify-affiliated plastic surgery or dermatology clinic in Korea and settle the bill on site receive a set percentage of the amount back in JPYC. Depending on the clinic and the procedure, the cashback can reach 15%.
What accelerated JPYC's spread in Korea was its listing on Upbit on the 17th. Until then, acquiring JPYC required a complicated process: setting up a personal wallet and swapping other cryptocurrencies for it on a decentralized exchange such as Uniswap. That was a difficult route for ordinary users unfamiliar with managing wallets and navigating blockchain networks. With Upbit now supporting trading, JPYC can be purchased with won as easily as bitcoin or any other cryptocurrency.
The problem is that the current regulatory framework has not kept pace with how quickly foreign-currency stablecoins are penetrating the Korean market. Measures to regulate stablecoins issued offshore are under review as part of discussions on the Digital Asset Basic Act, but with the legislation delayed, JPYC is currently treated the same as any other cryptocurrency. Nor are there separate provisions on how to verify the reserve assets and the issuance and redemption structures of overseas issuers within Korea, or on who bears responsibility for consumer protection if problems arise in domestic circulation.
With JPYC now able to buy Korean mobile gift cards, concerns are growing that blind spots in anti-money-laundering controls could widen. Purchases of JPYC on Upbit go through know-your-customer (KYC) and anti-money-laundering (AML) checks. But once the coins are withdrawn to a personal wallet outside the exchange and forwarded to another wallet, linking a wallet address to the identity of the actual holder can become difficult.
JPYC can also be obtained on decentralized exchanges. Unlike centralized exchanges, decentralized platforms have no operator to carry out customer verification, so users can swap other cryptocurrencies for JPYC without any such procedure. It is hard to rule out the possibility that illicit funds from abroad could be converted into JPYC, routed through a personal wallet and used to buy Korean mobile gift cards — bypassing existing anti-money-laundering systems and serving as a channel to convert the funds into cash in Korea. Yoon Seung-sik, head of research at Tiger Research, said the faster yen stablecoins become integrated with the market, the greater the long-term impact could be.
Critics also argue that Korea's delay in setting rules is ultimately doing nothing but build up overseas stablecoin ecosystems. Korean investors are supplying liquidity and Korean merchants are providing places to spend, while overseas operators capture the users and the business opportunities. Hwang Suk-jin, a professor at Dongguk University's Graduate School of Information Security, said that if foreign-currency stablecoins spread into Korea's payment, deposit and remittance networks, the effectiveness of monetary policy will weaken and overseas fund flows will become harder to track. Rather than responding by trying to block their inflow, he said, Korea should accelerate the legal framework for a won-based stablecoin and build the infrastructure covering its circulation so that domestic operators can compete.
