South Korea Pauses CBDC Pilot Amid Shift Toward Won-Backed Stablecoins

Highlights:

• South Korea has delayed the CBDC testing as banks raise concerns over high costs.
• Lawmakers are pushing for a stablecoin law to reduce reliance on foreign-backed tokens in the Korean crypto market.
• Eight major banks plan to launch a won-backed stablecoin by next year as support grows for private digital tokens.

The Bank of Korea has paused the second stage of its digital currency pilot after participating banks raised cost concerns and questioned its future. The first phase ran from April to June 2025 and involved 100,000 participants who tested payment services using the central bank-issued token. The second phase was expected to launch in late 2025 and include merchant payments and peer-to-peer transfers. However, the central bank informed banks that the upcoming round of testing would not proceed as planned.

SOUTH KOREA HALTS CBDC TRIALS AS BANKS EYE STABLECOIN REGULATION

Bank of Korea suspends central bank digital currency pilot, per local media reports.

Pause follows government signaling approval for bank-issued stablecoins.

Participating banks increasingly favor stablecoins…

— CryptoEdge (@EdGeraldX) June 30, 2025

The CBDC pilot, known as Project Han River, brought together seven commercial banks to assess how a digital Korean won could function in real-world settings. When banks were analyzing the outcomes of the initial phase, they requested an explanation of the project’s long-term objectives. A number of banks considered the trial to be too expensive and doubted its commercial feasibility. According to one of the top bank officials, the second phase had already been nearly canceled over these concerns.

Officials at the Bank of Korea have shifted their attention to broader developments in the digital asset space. They have now chosen to monitor new legislative proposals that focus on creating a framework for stablecoins tied to the Korean won.

Government Prioritizes Stablecoin Framework Over State-Issued Digital Currency

The South Korean government introduced a bill under the Digital Asset Basic Act that sets up rules for companies seeking to issue won-backed stablecoins. The proposed law includes licensing terms, equity capital requirements, and guidelines for reserve management and user protection. Firms with at least ₩500 million, or roughly $370,000, in capital would qualify to apply.

President Lee Jae-myung has placed stablecoin development at the top of his administration’s financial agenda. Since taking office earlier this month, he has directed attention toward supporting digital assets tied to the national currency. His party believes these assets will help strengthen the country’s monetary system. They also warn that the local crypto market relies too much on dollar-pegged stablecoins such as USDT and USDC.

The legislators have expressed concerns that such a dependence would render the nation susceptible to financial control. Consequently, they are encouraging a quicker creation of stablecoins issued locally.

Min Byeong-deok, the head of the Digital Asset Committee, emphasized the need to remain competitive within the international digital economy. He said the stablecoin sector could outgrow other major industries such as artificial intelligence and semiconductors. He urged lawmakers to act quickly to support qualified issuers.

Korea Pauses CBDC Pilot as Banks Push for Private Stablecoins

Commercial banks have started to prepare their own stablecoin offerings. KB Kookmin, Shinhan, Woori, and Nonghyup are among the eight major banks that plan to issue a stablecoin pegged to the Korean won by 2022. According to these banks, the private stablecoins have more visible advantages compared to the central bank digital currency project.

They choose stablecoins because they view them as more useful right now and with a better profit potential. In the event that the CBDC pilot is restarted, the Bank of Korea could restrict the number of banks participating. At the moment, authorities are still monitoring the development of the proposed stablecoin bill and its effects on the financial system of Korea.