Native experiences point out that South Korea’s central financial institution has suspended its central financial institution digital foreign money (CBDC) pilot program, pivoting the nation’s focus towards a non-public, bank-led stablecoin initiative.
The Financial institution of Korea (BOK) halted its “Challenge Han River,” following mounting stress from business banking companions who cited prohibitive prices and the absence of a viable enterprise mannequin, as The Korea Herald reported.
The mission launched earlier this yr was a two-tier system involving a wholesale CBDC for interbank settlement and tokenized deposits for retail use by 100,000 residents. Nevertheless, the seven taking part banks collectively spent practically 35 billion gained (about $26 million) on the preliminary three-month section and had been unwilling to proceed and not using a clear path to profitability.
A final-minute provide from BOK Governor Rhee Chang-yong to cowl half the prices for the mission’s second section was rejected, signaling that the banks’ considerations had been elementary to the enterprise case, not simply the expense.
Within the vacuum left by the state-led mission, a consortium of eight main business banks, together with KB Kookmin, Shinhan, and Woori, has fashioned to develop a won-pegged stablecoin. This initiative is actively supported by the Korea Monetary Telecommunications and Clearings Institute (KFTC) and goals for a public launch in late 2025 or early 2026.
The banks see a transparent business benefit in issuing their very own stablecoins, leveraging their buyer base to create new income streams and forestall disintermediation from fintech rivals or a state-run foreign money.
This strategic pivot was enabled by a shift in authorities coverage below President Lee Jae-myung, who campaigned on a pro-crypto platform that included a promise to approve won-pegged stablecoins.
President Lee’s administration is fast-tracking the “Digital Asset Primary Act,” laws that gives a authorized framework for stablecoins. The act notably grants main regulatory authority to the Monetary Providers Fee (FSC), not the Financial institution of Korea, and units a low capital requirement of ₩500 million (about $370,000) to encourage competitors.
The non-public sector has moved aggressively to safe its place. KB Kookmin, the nation’s largest financial institution, filed for 17 totally different logos for potential stablecoin tickers like KBKRW, which it referred to as a “preemptive transfer.” In the meantime, Shinhan Financial institution has been making ready for this second for years, conducting worldwide remittance proofs-of-concept with stablecoins way back to November 2021.
Whereas BOK Governor Rhee has publicly conceded that won-backed stablecoins are needed, he and different central financial institution officers proceed to precise grave considerations. They warn {that a} proliferation of personal stablecoins may undermine financial coverage, create systemic threat harking back to the 2022 Terra/Luna collapse, and speed up capital flight as customers swap won-stablecoins for dollar-pegged options.
The amount of USD-pegged stablecoin transactions in Korea reached ₩56.95 trillion ($41.6 billion) within the first quarter of 2025 alone.
The central financial institution has advocated for a extra cautious rollout, preferring that solely extremely regulated banks be allowed to difficulty stablecoins initially earlier than increasing to non-bank entities.
Within the meantime, the BOK has framed its suspended CBDC work as a possible “countermeasure to stablecoins,” a public choice to be revived if the non-public market proves too unstable.
