South Korea's central bank has put on hold its digital currency project in favor of focusing on regulating stablecoins.
Halting the CBDC Project
The Bank of Korea has suspended plans for the second phase of its CBDC pilot, which was set to launch in the fourth quarter of 2025. Participating banks were notified of the temporary pause in discussions. The bank is reevaluating the role of CBDC as it shifts focus toward regulating private stablecoin issuers.
Regulating Stablecoins
Instead of continuing CBDC testing, the central bank will monitor the progress of a legislative proposal to establish a regulatory framework for Korean won-backed stablecoins. This proposal includes licensing requirements for issuers, reserve management, and user protection, part of President Lee Jae-myung's broader agenda to accelerate stablecoin development in the country.
Commercial Banks' Response
In response to the policy shift, eight of South Korea's largest banks have joined forces to launch an initiative for issuing a KRW-pegged stablecoin. Democratic party leaders emphasized the importance of introducing won-denominated stablecoins, citing the local crypto market's overreliance on dollar-pegged assets.
The suspension of the CBDC project and the shift toward regulating stablecoins highlight the volatility of the cryptocurrency market in South Korea and the increasing focus on protecting national financial interests.
