The Bank of Korea has suspended the second phase of its central bank digital currency (CBDC) testing amid growing support for local stablecoins. This decision arises from the need to clarify government positions.
Suspension of the Second Phase of CBDC Testing
According to a report by Chosun Daily, the Bank of Korea has notified participating banks about the postponement of the second phase of CBDC trials, which was scheduled for later this year. An official from one of the banks indicated that the central bank is awaiting clarifications from the government regarding stablecoins and how CBDCs would align with the proposed framework.
Banks Concerned Over High CBDC Costs
Participating banks have expressed dissatisfaction with the high costs associated with the CBDC project, stating that the second phase of testing was almost 'on the verge of collapse'. Some banks have shown a preference for focusing on their own stablecoin initiatives, which appear to have a clearer path to financial advantages.
Stablecoin Initiatives Gain Popularity
Recent reports indicate that eight South Korean banks plan to launch a won-backed stablecoin by next year. Half of these banks participated in the first phase of CBDC testing, signifying a potential shift in focus towards stablecoins. Market reactions to this news were mixed, with shares in KakaoPay Corp dropping 7%, while KB Financial Group shares rose by 0.8%.
The suspension of CBDC testing highlights changing priorities in South Korea's financial system, where the rising support for stablecoins reflects banks' needs and interest in more predictable and beneficial solutions.
