South Korea's Largest Banks Launch Won-Pegged Stablecoin to Counter Foreign Dominance

South Korea’s eight largest commercial banks have united to launch a Korean-won-pegged stablecoin, marking the country’s first unified financial consortium dedicated to this endeavor. The initiative, coordinated by the Open Blockchain & DID Association and overseen by the Financial Supervisory Service (FSS), aims to pilot issuance by early 2026. The participating banks—KB Kookmin, Shinhan, Woori, NH Nonghyup, Industrial Bank of Korea, Suhyup, Citibank Korea, and Standard Chartered First Bank—collectively hold a significant portion of national retail deposits.

The move comes in response to a surge in the use of foreign stablecoins, with dollar-pegged coins like USDT and USDC reaching ₩56.95 trillion ($41.6 billion) in trade volume during Q1 2025, tripling since Q3 2024. This trend has raised concerns among domestic banks about the potential dominance of foreign stablecoins in the local market. “There is a shared sense of crisis that if things continue this way, foreign dollar coins could dominate the domestic market,” a banking source told Cryptonews.

The consortium proposes a dual-model design to address public trust and use cases. One version of the stablecoin will be backed by client funds held in escrow via a trust structure, while the other will be directly linked to on-balance-sheet deposits held by the issuing bank. This approach aims to test both scalability and user confidence, especially in light of Korea’s experience with the Terra-Luna collapse in 2022.

The Bank of Korea (BOK) has expressed cautious support for the bank-led effort. Senior Deputy Governor Ryoo Sang-dai stated on June 24, “It is desirable to first allow banks, rather than non-bank entities, to issue won-based stablecoins and gradually expand.” Analysts interpret this positioning as a strategic preference to allow highly regulated incumbents to establish the groundwork for digital currency issuance before opening the gates to fintech firms or international players.

The stablecoin consortium is a clear signal of South Korea’s intention to reassert monetary sovereignty as digital assets blur traditional currency borders. Regulators and banks are concerned that the continued growth of foreign stablecoins could weaken the won’s role in domestic digital transactions. Korea is now playing catch-up with Japan and the EU, following Japan’s launch of Progmat Coin by its top banks and the European Central Bank’s MiCA framework, which opens doors to euro-pegged stablecoins.

While some observers frame Korea’s move as defensive, others see it as a proactive shift that could eventually position a won-backed coin as a regional clearing asset, especially in industries like gaming, K-pop merchandising, and cross-border remittances. The Terra crisis, which caused billions in investor losses and originated in Korea, cast a long shadow over stablecoin innovation in the country. However, the banks’ fully backed model, with transparency mechanisms expected to be enshrined in the upcoming Digital Asset Act, aims to rebuild public trust.

Final regulatory approval will depend on the FSS’s risk assessments and ongoing consultation with the Bank of Korea. The won-backed coin could initially be integrated into digital banking apps and payment systems, targeting use cases such as remittances, peer-to-peer transfers, and interbank settlements. If successful, the model may inform South Korea’s long-term CBDC roadmap. With Asia rapidly emerging as the epicenter of regulatory experimentation around stablecoins, South Korea’s megabank consortium has put the won on the digital map, on its own terms. The question now is whether it can scale before dollar dominance becomes irreversible.