Axelar: Interoperability Infrastructure for Stablecoins and KRW Payment Rails
1. Introduction: The Issue Is Not Speed, but the Payment Model
Stablecoins are often discussed as a way to improve the speed and cost of cross-border remittances. In Korea, however, whether stablecoins can translate into actual payments depends less on transfer speed and more on what happens after the on-chain transfer. Moving coins quickly between wallets is one thing. Converting those assets into KRW and depositing them into a recipient’s bank account is another. For assets transferred on public blockchains to be paid out in KRW, there must be asset verification, FX compliance, customer due diligence (KYC), anti-money laundering (AML) controls, and an entity that bears responsibility for the final payout.
Sarah Breeden, Deputy Governor of the Bank of England, has warned of “walled gardens” in digital money: fragmented, closed payment systems that do not interoperate with one another. Her proposed solution is interoperability, which is also essential to preserving the “singleness of money,” where different forms of money can be exchanged at par. Korea’s KRW payment rails and stablecoins on public blockchains still operate in separate systems.
So far, discussions around stablecoin remittances have largely focused on a token-level comparison: “Which stablecoin can move faster and more cheaply?” But the question Korean banks and regulators are actually asking is different.
“Can stablecoins issued by multiple entities and traded across multiple chains be paid out consistently in KRW within FX, settlement, and accounting frameworks?”
This article starts from that question. Based on Korea’s KRW payment system, FX regulation, and the Bank of Korea’s experiments with tokenized payments, it examines the gateway model needed for stablecoin liquidity on public blockchains to reach KRW payout within a regulated framework. It also explores how a gateway can determine which assets on which chains should be recognized as the same KRW-denominated asset if KRW stablecoins are issued across multiple chains, and what role interoperability infrastructure can play in that process.
2. The Basic Framework for KRW Payments and FX Regulation
2.1 Current Cross-Border Remittance Infrastructure
Korea’s cross-border remittances and foreign currency payments are processed under the Foreign Exchange Transactions Act. Foreign currency remittances through banks are received through commercial banks’ FX procedures, while overseas payments are processed through correspondent banking networks. When the sender’s and recipient’s banks are not directly connected, one or more intermediary banks are involved. In this process, SWIFT functions not as a payment network that directly moves funds, but as a messaging network that transmits payment instructions between banks. The actual movement of funds is processed through debits and credits in correspondent accounts. As the number of intermediaries increases, costs and processing times rise, and it becomes harder to track remittance status and fee structures in real time. This is why stablecoins have attracted attention in remittances: they are expected to bypass parts of the intermediary chain.
Non-bank remittance fintechs also operate within the FX regulatory framework. To register as a small-amount overseas remittance service provider, a company must satisfy requirements such as minimum capital, connection to the foreign exchange computer network, and qualified FX specialists on staff. Transaction limits and KYC/AML obligations also apply. Fintechs such as Hanpass, SentBe, and Travel Wallet have gained competitiveness in certain corridors through lower costs and better user experiences, but they are not outside FX regulation or the framework of payment responsibility. In Korea, all cross-border movement of funds is handled within the scope of FX regulation.
2.2 Amendments to the Foreign Exchange Transactions Act and the Expansion of Regulatory Boundaries
In 2026, this regulatory boundary expanded to cover cross-border transfers involving virtual assets. The amendment to the Foreign Exchange Transactions Act, passed by the National Assembly on May 7, 2026, introduced a registration requirement to bring businesses transferring virtual assets between Korea and foreign jurisdictions under the oversight of FX authorities.
Businesses that transfer virtual assets between Korea and foreign jurisdictions will be required to register separately with the FX authorities. Unregistered operations, operations conducted through improper means, and violations of payment procedures may be subject to criminal penalties or administrative fines.
This change does not shut down the possibility of stablecoin remittances. Rather, it means that such models must be designed within the regulatory framework. For stablecoins to result in actual KRW payouts in Korea, the post-transfer layer must handle FX regulation, KYC/AML, settlement, and final payout responsibility.
3. The Reach and Limits of Permissioned Tokenization
3.1 Project Hangang and Agorá
At the same time, the Bank of Korea is experimenting with tokenized payments and digital currency-based payment models along two tracks: Project Hangang in domestic payments and Project Agorá, led by the BIS, in cross-border payments. Both projects experiment with payment models using digital currency and deposit tokens, but both are based on networks where only permissioned institutions can participate.
Project Hangang combines wholesale CBDC with commercial bank deposit tokens to test whether deposit tokens can function as a domestic payment and settlement instrument. The first real-transaction pilot, conducted for about three months from April to June 2025, involved seven commercial banks and roughly 80,000 users. The amount converted into deposit tokens was reported at approximately KRW 1.64 billion. The second phase began in earnest in March 2026, and the number of participating banks expanded from seven to nine. The Bank of Korea identified several areas for experimentation, including the foundation for deposit token commercialization, peer-to-peer transfers, biometric authentication, automatic deposits and withdrawals, digital vouchers, and other programmable functions.
What matters is not the scale of the results, but the way Project Hangang is implemented. Hangang’s shared ledger is permissioned, and the Bank of Korea chose not to connect the system directly to BOK-Wire+. Instead, it adopted a method of transferring data through secure USB devices. This reflects a permissioned setup that limits direct connections with external systems. Project Agorá, led by the BIS and the IIF, is a permissioned network that experiments with cross-border payment models using tokenized deposits and wholesale CBDC. It involves central banks from seven currency areas and numerous private financial institutions. While Agorá retains certain elements of the existing correspondent banking model, it is designed to test whether tokenized central bank money and commercial bank deposits can improve the efficiency of cross-border payments.
3.2 Limits of Permissioned Tokenization Networks
Both projects test the trust and consistency of tokenized payments among regulated financial institutions. However, neither directly connects public-chain stablecoin liquidity to Korea’s domestic KRW payment system. There are two limitations.
First, participation is limited by currency area. Korea’s cross-border remittance demand is spread not only across major currency areas, but also across regions like Southeast Asia. A permissioned global payment network alone is therefore unlikely to cover all destination-country local currency payouts and off-ramp needs.
Second, global stablecoin liquidity is concentrated around public-chain stablecoins such as USDC and USDT, but permissioned networks do not directly incorporate this liquidity. Ultimately, permissioned networks provide internal consistency and control, but they face structural limits in absorbing liquidity that already exists on public blockchains. The core challenge, then, is how to design an interface that can connect with public-chain liquidity while preserving the control and accountability of permissioned networks.
The issue is therefore not whether permissioned networks should be replaced by public blockchains. It is where and how public-chain liquidity can be accepted while maintaining the control and accountability of permissioned networks.
4. Gateway: A Design Choice for the Connecting Layer
4.1 Definition of a Gateway
For public-chain stablecoins to result in actual KRW payouts in Korea, KRW conversion and settlement processing are required after the on-chain transfer. Stablecoins can shorten parts of the correspondent banking chain through wallet-to-wallet transfers, but on-chain transfer alone does not complete a KRW payment. For on-chain assets to result in actual payment, an off-chain entity is needed to confirm token receipt, comply with FX regulation, apply KYC/AML controls, manage settlement records, and pay out to a KRW bank account or deposit token. In this article, the operational interface that connects assets on public blockchains to regulated KRW payment rails is referred to as a gateway.
4.2 Three Connection Models
Cross-border digital value transfers can connect to Korea’s KRW payment system through three broad models.
The permissioned-network-only model uses institution-led payment networks such as Agorá and deposit tokens. It offers strong regulatory stability, but it struggles to cover non-participating currency areas and public-chain liquidity.
The public-stablecoin-only model involves direct remittance using USDC, USDT, or KRW stablecoins. It offers speed and accessibility, but still needs to address reporting and registration requirements under the Foreign Exchange Transactions Act, KYC/AML obligations, and the question of who bears liability for the final KRW payout.
The gateway model is an arrangement in which a bank or regulated service provider handles FX reporting, KYC/AML, settlement records, and KRW payout between public-chain stablecoins and deposit tokens or KRW bank accounts. Among the three models, the gateway model is the most realistic compromise under the current regulatory and operational environment. It is designed to satisfy both the openness of public blockchains and the regulatory requirements of institutional payment rails.
4.3 Business Implications of the Gateway
From a bank’s perspective, the gateway is not merely a compliance function. It represents a new business position that brings public-chain value transfer into regulated KRW payment rails. In the process of receiving, converting, and settling overseas-issued stablecoins into KRW, banks can secure settlement fees, FX spreads, and customer touchpoints. Because on-chain rails are not bound by business hours or settlement days, banks can design a settlement environment that is more flexible than the traditional correspondent banking model. At the same time, by routing stablecoin-based transfers through formal financial-sector KYC/AML procedures, banks can help reduce the blind spots of unauthorized FX transactions that the Bank of Korea and financial authorities have been concerned about.
5. Multichain Interoperability and Axelar
5.1 The Gateway’s Core Technical Challenge
Even if the gateway operator is determined, a separate technical challenge remains in a multichain environment. If KRW stablecoins are issued simultaneously across multiple public blockchains, the gateway must determine which tokens on which chains can be recognized as the same KRW-denominated asset. The key criterion is not the number of supported chains, but whether the cross-chain transfer method is officially controlled and recognized by the issuer. Wrapped tokens that simply replicate an asset on another chain may not be directly tied to the original issuer’s redemption obligation. By contrast, a burn-and-mint model, where tokens are burned on one chain and reissued on another, is better suited to maintaining a single official token state under the issuer’s control. If a gateway accepts a token that cannot be clearly recognized as an official asset for KRW payout, the gateway becomes a channel for operational risk rather than a trusted interface.
In the U.S. dollar stablecoin market, Circle’s CCTP is the best-known example of maintaining the official state of USDC across chains through a burn-and-mint model. However, CCTP is specialized for a single asset: USDC. In a future KRW stablecoin environment where issuers and chains may vary, a general-purpose interoperability layer will be needed. That layer must be able to connect and verify the state of multiple chains and multiple tokens without being tied to a single asset.
5.2 Separation of Issuer and Infrastructure Roles
In this context, Axelar offers a reference model for the interoperability functions a gateway needs in a multichain environment. If KRW stablecoins and public stablecoins are distributed across multiple chains, gateways will need asset recognition, message verification, and connectivity between public and permissioned networks. Axelar is an example of infrastructure that brings these functions together in a single framework.
The key point is the separation of roles. Axelar does not issue stablecoins directly and does not perform KYC/AML. Responsibility for issuance, reserve management, redemption commitments, and customer verification remains with regulated financial institutions such as banks, custodians, and VASPs. Axelar operates as a non-issuing infrastructure layer that supports the consistent reflection of issuer policies and asset states across multiple chains.
If the gateway is responsible for KRW conversion and payment, interoperability infrastructure is the technical layer that supports the consistent execution of that responsibility across multiple chains. For a bank or regulated service provider to recognize an on-chain asset as eligible for KRW payout, it must be able to verify which chain the asset exists on, what state it is in, and whether the settlement instruction has been delivered in a verifiable way. Axelar functions in this process as interoperability infrastructure that supports asset-state consistency, cross-chain message verification, and connectivity between networks.
5.3 ITS (Interchain Token Service): Standardizing Asset Recognition
ITS allows a single token to be recognized as the same official asset, even when it is issued and transferred across multiple chains. Instead of creating separate wrapped tokens on each chain, the burn-and-mint method supported by ITS allows a token to be managed as the official asset of the same issuer regardless of which chain it exists on. The issuer can control total supply and chain-specific circulation, while users experience the asset as the same token even when moving across chains.
5.4 GMP (General Message Passing): Connecting Settlement
GMP delivers cross-chain state changes, receipt requests, redemption instructions, or settlement instructions as verifiable messages. For example, if a user wants to convert stablecoins on one chain into a KRW payout, the gateway can confirm the on-chain deposit event and deliver the required verification message to the issuer or settlement system. This layer can help standardize how the gateway confirms on-chain events and processes them as settlement instructions.
5.5 Interchain Amplifier: Permissioned-Network Connectivity and Institutional Participation in Verification
In the Korean context, one particularly important point is that Axelar’s connectivity does not have to be limited to transfers between public blockchains. Axelar’s Interchain Amplifier is a protocol designed to connect new chains that are not already part of the Axelar network through a separate verification model. Connectivity is not limited to EVM-based chains. In principle, it could extend to non-EVM chains and institutional permissioned networks, depending on the design. Institutions that are party to the connection could also participate as verifiers responsible for validating the security of that connection. A verifier stakes AXL for a specific chain connection and verifies and signs the validity of transactions or messages generated through that connection.
This means institutions do not need to adopt external interoperability infrastructure only as users. They may also be able to participate in the verification model of the connection itself. Even in a permissioned-ledger model such as Hangang, institutions could consider an approach that does not fully open the network, but instead creates controlled points of connectivity. By participating in verification and reinforcing the security and stability of that connection point, institutions can explore a model that preserves the trust assumptions of a permissioned network while connecting to external multichain liquidity. This offers one reference model for the dilemma of permissioned networks discussed above: they provide strong control, but risk becoming disconnected from external liquidity.
6. Conclusion: Who Connects It, and Through What?
Going forward, competition will depend less on transfer speed itself and more on how reliably distributed on-chain liquidity can be connected to KRW payouts within the regulatory framework. Fintechs such as Hanpass and SentBe already provide low fees and fast payouts in specific remittance corridors. It is therefore difficult to assume that stablecoin rails will consistently offer a cost advantage over existing infrastructure across all remittance corridors. In the Korean market, what matters is not fast transfer alone, but whether there is an operating model that can consistently handle FX regulation, KYC/AML, settlement records, and final payout responsibility after the on-chain transfer.
The answer to “who” is beginning to take shape around banks. The Bank of Korea has indicated that, in the early stage of a KRW stablecoin ecosystem, banks may be expected to handle core functions such as issuance, reserve asset management, and anti-money laundering controls. During legislative discussions, there has also been consideration of a model in which a consortium majority-owned by commercial banks serves as the issuer. The specific issuance model has not yet been finalized. This suggests that banks, or bank-led arrangements, which can satisfy both gateway-related licensing requirements and reserve asset management capabilities, are being considered as a central pillar in the policy discussion. Banks that have historically handled FX conversion and inbound remittances may expand into the role of connecting public-chain value transfers with regulated KRW payment rails.
The answer to “through what” is an interoperability-based connection layer. As long as KRW stablecoins exist across multiple chains, gateways must determine which assets on which chains can be recognized as the same KRW-denominated asset. That determination must operate reliably on verifiable interoperability infrastructure.
Axelar’s ITS and GMP, together with Interchain Amplifier, which allows institutions to participate in verification, provide a reference model for asset recognition and settlement connectivity. If banks are the responsible entities behind the gateway, this kind of interoperability infrastructure becomes the technical foundation that allows the gateway to carry out its responsibilities consistently across chains.
Let us return to the question posed in the introduction: “Can stablecoins issued by multiple entities and traded across multiple chains be paid out consistently in KRW within FX, settlement, and accounting frameworks?” The answer depends less on who can transfer faster, and more on whether liquidity across separate payment networks can be connected to KRW payout in a verifiable way within the regulatory framework.
Key Sources
Bank of England (2025) - International Payment Rails: The Value of a Harmonised Gauge
매일경제 (2026) - 외환거래법 개정안 국회 본회의 통과…코인 해외이전 사업자 재경부 등록 의무화
KDI 경제교육·정보센터 - 프로젝트 한강 1차 실거래 파일럿 결과보고서
Circle - Cross-Chain Transfer Protocol (CCTP)
Axelar Docs - Interchain Token Service
Axelar Docs - General Message Passing
Axelar Docs - Introduction to the Interchain Amplifier
Axelar Docs - Become an Amplifier Verifier
Disclaimer
The contents of this report are for informational purposes only and do not constitute a recommendation or basis for legal, business, investment, or tax advice under any circumstances. References to specific assets or securities are for informational purposes only and do not represent an offer, solicitation, or recommendation to invest. The final responsibility for any investment decisions lies solely with the investor, and this report should not be used as a guideline for accounting or legal judgment.
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