Bank of Korea Pauses CBDC Project to Promote Stablecoins

The Bank of Korea has decided to pause its central bank digital currency (CBDC) project, shifting its focus towards promoting the use of stablecoins. This decision comes as the government seeks to leverage the benefits of stablecoins in the digital economy. The Bank of Korea's governor, Rhee Chang-yong, has expressed a preference for CBDC solutions over private stablecoin issuance, creating a tension within the central bank's policy. Despite this, the government is moving forward with plans to issue a stablecoin, utilizing the experience gained from the Bank of Korea's CBDC project. This stablecoin focus is complemented by strong institutional support, indicating a strategic shift in the region's approach to digital currencies.

The Bank of Korea has temporarily halted its CBDC testing program, signaling a major pivot in the country’s digital finance strategy. The move comes amid rising government support for stablecoins, as newly elected President Lee Jae-myung pushes forward a pro-crypto agenda. The central bank informed participating banks that the second phase of CBDC trials, initially scheduled for later this year, has been postponed. This decision follows the completion of the first testing phase in June. The central bank is now waiting for more clarity on the government’s plans for stablecoins and how a CBDC would coexist with them. The uncertainty stems in part from the government’s growing openness to stablecoin issuance, seen as a potentially more profitable path for banks.

President Lee made multiple crypto-friendly promises during his campaign, most notably, allowing the issuance of Korean won-backed stablecoins. Earlier this month, his party introduced a bill that would allow companies with at least 500 million Korean won in capital to issue such tokens. For many of the participating banks, the CBDC program has proven costly and unclear. Banks have expressed frustration over the high expenses associated with the trials and the lack of a clear commercialization roadmap from the Bank of Korea. One official even stated the second stage of the pilot was “on the verge of collapse.”

As a result, the central bank is now considering delaying the next phase until early next year and may reduce the number of financial institutions involved. The first phase of testing included 100,000 participants using CBDC for payments at merchants such as convenience store chain 7-Eleven, with future phases expected to include remittances and more retail applications. Meanwhile, interest in stablecoins is heating up. Just last week, eight banks, including KB Kookmin, Shinhan, Woori, and NongHyup — announced plans to collaborate on a Korean won-backed stablecoin, targeting a launch by 2026.

As the regulatory and financial landscape continues to evolve, South Korea’s digital currency future appears increasingly aligned with stablecoins over central bank-issued alternatives. The Bank of Korea's decision to pause its CBDC project and promote stablecoin use reflects a broader trend in the global financial landscape, where stablecoins are increasingly seen as a viable alternative to traditional fiat currencies. The government's promotion of stablecoin use is expected to drive innovation in the digital economy, as businesses and consumers alike seek to take advantage of the benefits offered by stablecoins. The Bank of Korea's decision to pause its CBDC project and promote stablecoin use is a significant development in the region's digital currency landscape. The government's promotion of stablecoin use is expected to drive innovation in the digital economy, as businesses and consumers alike seek to take advantage of the benefits offered by stablecoins.