South Korea’s central bank puts its digital currency (CBDC) tests on hold to focus on local stablecoin initiatives.
The Bank of Korea has announced the temporary suspension of its central bank digital currency (CBDC) project. According to Yonhap News, the central bank recently informed participating banks in the Hangang CBDC project of its decision to postpone discussions on the second phase of digital currency testing.
The pause comes less than three months after the pilot program’s launch, which involved 100,000 citizens using the CBDC with local merchants in partnership with the country’s major banks. The first phase of the pilot is expected to conclude by the end of this month.
The Bank of Korea’s decision coincides with growing interest in stablecoins pegged to the local currency. Newly elected president Lee Jae Myung has pledged to legalize the issuance of won-backed stablecoins — currently banned — and to foster a domestic market for these digital assets to help prevent capital flight.
Min Byeong-deok, a lawmaker from the ruling party who led digital asset policy during the presidential campaign, has proposed legislation to establish a licensing framework and regulatory requirements for potential stablecoin issuers.
Kakao and Naver, South Korea’s two largest tech firms, have filed trademark applications for stablecoins via their mobile payment platforms. According to local sources, eight of the country’s top banks — including those involved in the CBDC project — are reportedly planning a joint venture to issue a won-backed stablecoin.
Despite the CBDC project’s suspension, the Bank of Korea has expressed a favorable stance toward won-denominated stablecoins. Governor Lee Chang-yong stated that he sees a need for such assets, provided that adequate risk management measures are in place.
One factor behind the decision to suspend the CBDC initiative was the financial burden on participating banks. According to reports, the pilot program imposed significant costs on local institutions, particularly in the absence of a concrete implementation plan. On average, each of the seven participating banks spent 5 billion won (around $3.7 million) on the project.
