The Bank of Korea (BOK) has halted the rollout of its central bank digital currency (CBDC) just before the second testing phase due to complaints from banks.
Banks Voice Concerns
Several banks have expressed concerns regarding potential costs, cybersecurity challenges, and unclear guidelines surrounding the wholesale model of the CBDC. Their feedback emphasizes the need for more clarity on integration, settlement processes, and risk management before proceeding to a wider testing phase.
Rising Stablecoin Debate
As CBDC plans face challenges, interest has grown in stablecoins pegged to the South Korean won. Private firms are exploring regulated stablecoin frameworks, citing greater flexibility and faster time-to-market compared to a CBDC. The BOK’s pause allows regulators space to assess how these stablecoins could complement or compete with a central bank issued digital currency.
What Happens Now?
The BOK is using this pause to:
1. Conduct deeper consultations with banks to resolve technical and regulatory concerns. 2. Study the stablecoin landscape to determine whether a regulated won stablecoin could coexist alongside a CBDC. 3. Reassess the design and timeline for phase two testing to ensure a smooth, secure implementation.
With significant feedback from the banking sector and increased interest in stablecoins, this pause marks a critical turning point. The success of the CBDC project will depend on effective collaboration, clear regulation, and integration with broader digital currency strategies in Korea.
