South Korea Pauses CBDC Initiative to Promote Stablecoins Hong Kong Rolls Out Stablecoin Framework to Challenge USD Dominance

South Korea has decided to pause its central bank digital currency (CBDC) initiative, shifting its focus towards promoting domestic stablecoins. The Bank of Korea has informed banks involved in the project that introducing won-denominated stablecoins would be desirable, effectively slowing down any progress towards a CBDC. This move comes as the new government, led by President Lee Jae-myung, aims to foster a regulatory framework that enables firms with modest capital to issue stablecoins under the Digital Asset Basic Act. With over a third of South Korea’s population actively trading crypto, this shift towards stablecoins appears to be a strategic move to build and strengthen frameworks that cater to the growing crypto market.

Meanwhile, Hong Kong is rolling out a regulatory framework for stablecoin issuance, aimed at challenging U.S. dollar dominance and bolstering its own financial infrastructure. The Stablecoins Ordinance, set to be enforced starting August 1, 2025, mandates licensing for any fiat-referenced stablecoin issuer targeting the city’s residents. The rigorous licensing requirements cover reserve holdings, fund segregation, redemption rights, and anti-money-laundering protocols. Hong Kong Financial Secretary Paul Chan ties this initiative to China’s broader de-dollarization strategy, highlighting stablecoins as pivotal for trade and cross-border payments in local currencies. The goal is to solve long-standing pain points of slow and high-cost cross-border payments, better serving the real economy in the field of payment. Hong Kong anticipates local issuers and regulated institutions taking the lead, with limited retail uptake initially, but significant promise for cross-border institutional use.

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These strategic shifts by South Korea and Hong Kong signal a broader trend in the global digital asset economy. Both governments are seeking to balance private stablecoin innovation with preserving monetary policy control. South Korea’s pivot reflects a pragmatic approach, redirecting momentum from costly and uncertain CBDC deployment toward a more agile, regulated stablecoin model. Hong Kong’s strategy signifies a calculated expansion of its role in the global digital asset economy, linking stablecoin issuance to monetary liberalization and regional trade objectives, and supporting broader political goals. The success of these stablecoin ambitions will depend on the details of regulation, institutional participation, and financial market dynamics. As the crypto landscape evolves, having a reliable and feature-rich crypto wallet will become increasingly important for both individual investors and major institutions.