South Korea Pauses CBDC Project Focusing on Won-Backed Stablecoins

South Korea’s central bank has decided to pause its central bank digital currency (CBDC) project, shifting its focus towards the rapid development and regulation of won-backed stablecoins. This strategic pivot comes as the Bank of Korea has suspended plans for the second phase of its CBDC pilot, originally scheduled for the fourth quarter of 2025. Participating banks have been notified that discussions on the CBDC project will be temporarily halted as regulators reassess the role of a CBDC in the financial ecosystem.

The Bank of Korea had been actively preparing to expand its CBDC testing under “Project Han River,” which commenced earlier this year with a consortium of seven banks. The second phase of this project was intended to introduce features such as peer-to-peer transfers and merchant payments. However, concerns raised by banks regarding high costs and the absence of a clear commercialization plan have led the central bank to reassess the project’s viability.

In contrast, the central bank will continue to monitor the progress of a legislative proposal aimed at establishing a regulatory framework for Korean won-based stablecoins. This proposal, introduced under the Digital Asset Basic Act, outlines licensing requirements for issuers and includes provisions for reserve management and user protection. The move aligns with President Lee Jae-myung’s broader agenda to accelerate stablecoin development, which he has prioritized as a strategic financial initiative since taking office.

The administration supports a licensing regime that would allow companies with as little as ₩500 million in equity capital to issue stablecoins, subject to regulatory approval. Democratic Party leaders have emphasized the importance of won-denominated stablecoins in preserving South Korea’s monetary sovereignty, arguing that local crypto markets are overly reliant on U.S. dollar-pegged assets. They warn that continued dominance by foreign stablecoins could undermine domestic financial policy.

Min Byeong-deok, head of the Digital Asset Committee, has highlighted the potential of the stablecoin market, suggesting it could surpass even artificial intelligence or semiconductors in significance. He has called for regulatory measures to support issuance by compliant entities. In response to this policy shift, eight of the country’s largest banks, including KB Kookmin, Shinhan, Woori, and Nonghyup, have launched a joint initiative to issue a KRW-pegged stablecoin.

This strategic shift by South Korea’s regulators reflects a growing global trend towards stablecoins as a means of enhancing financial stability and sovereignty. By prioritizing won-backed stablecoins, South Korea aims to reduce its reliance on foreign digital assets and strengthen its domestic financial infrastructure. The move also underscores the importance of regulatory frameworks in fostering innovation while ensuring consumer protection and financial stability.