South Korea Banks Plan Won-Pegged Stablecoin Launch by 2026

South Korea’s ruling party has refuted recent reports suggesting that the government is preparing to launch a state-backed Korean won stablecoin. A spokesperson from the ruling Democratic Party of Korea (DPK) dismissed these claims as “groundless,” clarifying that the actual momentum in the stablecoin space is coming from the private sector.

The confusion arose from remarks made by Jin Sung-joon, the DPK’s chief policymaker, during a press briefing. Jin’s comments about monitoring discussions at the Presidential Commission on National Policy Planning were misinterpreted by some journalists as confirmation of an official stablecoin initiative. The DPK has since clarified that no such policy has been announced, attributing the misinterpretation to transcription errors.

Despite the denial, South Korea is actively advancing in the stablecoin arena, but through private sector initiatives rather than direct government issuance. A consortium of eight major banks, including KB Kookmin, Shinhan, and Woori, is actively developing a won-pegged stablecoin. This initiative is supported by the Korea Financial Telecommunications and Clearings Institute, the Open Blockchain and Decentralized Identity (DID) Association, and the Financial Settlement Institute. The goal is to challenge the dominance of dollar-backed stablecoins and provide a stable digital currency for various financial transactions.

The planned stablecoin rollout is anticipated between late 2025 and early 2026 and will feature two models: a trust-based version and a deposit-linked version, both pegged 1:1 to the Korean won. Legislative support for such innovations is already materializing with the DPK introducing the Digital Asset Basic Act on June 10, legalizing stablecoin issuance for firms with at least $368,000 in equity capital.

However, not everyone is convinced about the pace or direction of these developments. Bank of Korea Governor Rhee Chang-yong has expressed concerns that a stablecoin could facilitate easier currency swaps into US dollars, potentially undermining monetary policy. Deputy Governor Ryoo Sangdai has recommended a cautious, bank-led rollout, citing systemic risks. Ryoo noted, “It would be desirable to initially allow stablecoin issuance primarily through banks, which are subject to higher levels of financial regulation.”

Meanwhile, South Korea is also continuing its research into a central bank digital currency (CBDC), with a pilot program concluding in June and more pilots under consideration as an alternative strategy to balance innovation and financial stability.

The development of this stablecoin is significant as it represents a collaborative effort among some of the largest financial institutions in South Korea, indicating a strong commitment to innovation and digital transformation within the banking sector. The use of a won-pegged stablecoin could facilitate smoother cross-border transactions and enhance the efficiency of domestic payments, potentially reducing transaction costs and increasing speed.

The consortium's approach to developing the stablecoin involves leveraging blockchain technology to ensure transparency, security, and immutability. By pegging the stablecoin to the won, the banks aim to mitigate the price fluctuations that are common in other cryptocurrencies, making it a more reliable medium of exchange. This stability is crucial for gaining the trust of both consumers and businesses, who may be hesitant to adopt digital currencies due to their inherent volatility.

The timeline for the launch of the stablecoin is set for 2026, giving the consortium ample time to address regulatory challenges, technical hurdles, and market acceptance. The banks are likely to work closely with regulatory bodies to ensure compliance with existing financial laws and to seek any necessary approvals. This collaborative approach is essential for the successful integration of the stablecoin into the broader financial ecosystem.

The development of a won-pegged stablecoin by major South Korean banks is a strategic move that aligns with global trends in digital currency adoption. As more countries and financial institutions explore the potential of stablecoins, South Korea's initiative positions it at the forefront of this technological revolution. The successful launch of this stablecoin could serve as a model for other countries looking to integrate digital currencies into their financial systems, highlighting the benefits of collaboration and innovation in the financial sector.