South Korea Pauses CBDC Trials as Banks Shift to Stablecoins

The Bank of Korea has paused its central bank digital currency (CBDC) trials due to commercial banks favoring stablecoins. This decision comes as a result of the growing appetite for stablecoins and their advantages among local banks. The Bank of Korea seems to be observing the private sector’s stablecoin initiatives before deciding how to proceed.

South Korea has reached a pivotal moment in its digital asset journey. The Bank of Korea (BoK) has been forced to temporarily halt its CBDC trials. This move is not just a delay in testing but a significant shift in focus towards stablecoins, which are now preferred by local banks. The question now is whether the BoK’s CBDC program will ever return.

The turning point for the CBDC pause came shortly after the newly elected President Lee Jae-myung took office. President Lee has always been a vocal supporter of digital finance and even campaigned with several crypto and stablecoin-related promises. His administration recently proposed a bill that would allow private companies to issue stablecoins pegged to the Korean won, as long as they hold a minimum equity capital of 500 million KRW (about $370,000). This regulatory clarity has attracted the attention of major financial institutions, leading banks that were once invested in the central bank’s CBDC trials to pivot towards stablecoins.

The BoK launched its CBDC trials in April of this year, enlisting seven major banks to experiment with a digital version of the Korean won. The first phase of the trial included 100,000 users who tested the new CBDC between April 1 and June 30. However, as the second phase of testing approached, banks started to push back. According to local reports, the banks were frustrated with the high costs of the trial and the lack of a clear plan from the central bank. Without a roadmap for how the digital won would be implemented, these banks started to question the value of being involved any further.

While the CBDC project has now been paused, stablecoins are gaining traction. Eight South Korean banks, including KB Kookmin, Shinhan, Woori, and NongHyup, are reportedly teaming up to launch a won-backed stablecoin by 2026. Stablecoins present a clearer business opportunity for these banks, as they can be issued, branded, and monetized by the banks themselves. Unlike CBDCs, which are controlled and issued by central banks, stablecoins offer strong promises of profit for private players. Moreover, stablecoins allow banks to build their own business-to-consumer relationships, directly benefiting from transaction volumes, user adoption, and mainstream integration with small businesses.

The news of the CBDC suspension has been welcomed both within and outside South Korea. It is important to clarify that the BoK has not completely abandoned the CBDC plan. Instead, it is planning to reschedule the second phase of the trials to early 2026 and possibly reduce the number of participating banks. The central bank sees long-term value in developing a digital won but appears to be waiting to see how the private sector handles its stablecoins before deciding how to proceed. By focusing on stablecoins for now, South Korea’s banks are setting themselves to meet market demand. This move will also be a great opportunity to experiment with digital assets and build powerful platforms that could later work hand in hand with a digital won CBDC.