South Korea Halts CBDC Pilot as Banks Pivot to KRW-Backed Stablecoins – What’s Next?

Seoul pulls the plug on its digital won experiment—for now.

South Korea’s central bank quietly shelved its CBDC pilot program this week, shifting focus to private-sector KRW-pegged stablecoins. Banks are already racing to fill the void, with Shinhan and KB Kookmin testing institutional-grade won tokens.

Why the sudden pivot? Observers point to sluggish CBDC progress versus booming private stablecoin adoption. "When banks can issue compliant stablecoins in months, why wait years for a bureaucratic digital currency?" quipped one Seoul-based fintech exec.

The move signals a broader trend: Asia’s crypto hubs are embracing stablecoins as the pragmatic path to digitization—while CBDCs remain stuck in regulatory limbo. Just don’t call it a retreat; the Bank of Korea insists this is merely a "strategic pause."

One hedge fund manager’s take: "Central bankers hate admitting stablecoins won—but their balance sheets will love the liquidity boost."

TLDR

• South Korea’s central bank suspended its CBDC testing program after banks complained about high costs and lack of commercialization plans
• Eight major South Korean banks are now working together to launch a won-backed stablecoin by next year instead of continuing CBDC trials
• President Lee Jae-myung’s administration is pushing legislation to allow stablecoin issuance with minimum capital requirements of $370,000
• Banks participating in CBDC tests wanted to focus on profitable stablecoin projects rather than expensive government trials
• South Korean regulators worry about foreign stablecoins like USDT and USDC dominating their domestic crypto markets

South Korea’s central bank has halted its digital currency testing program as banks shift focus toward launching their own stablecoins. The Bank of Korea suspended the second phase of its CBDC trials after participating banks raised concerns about costs and profitability.

The central bank informed seven participating banks that it was postponing tests originally scheduled for later this year. Banks had been testing the digital won since April under “Project Han River” with 100,000 participants making payments at merchants including 7-Eleven stores.

Banking officials told local media that the CBDC project was “on the verge of collapse” due to high participation costs. The banks complained that the central bank had not provided a clear plan for how they could make money from the digital currency once launched.

A senior banking official said the Bank of Korea was now waiting to see how government stablecoin plans WOULD affect the need for a CBDC. The central bank may limit the number of participating institutions if it restarts testing next year.

Banks Team Up for Stablecoin Launch

Eight major South Korean banks announced plans to jointly issue a won-backed stablecoin by next year. KB Kookmin, Shinhan, Woori, and NongHyup are leading the effort, with four of these banks also participating in the suspended CBDC trials.

The banks see stablecoins as offering clearer profit opportunities compared to the government’s CBDC program. Commercial banks can charge fees for stablecoin services and build new revenue streams around the digital tokens.

President Lee Jae-myung campaigned on promises to support cryptocurrency innovation including stablecoin issuance. His Democratic Party introduced legislation allowing companies to issue won-backed stablecoins with minimum capital requirements of 500 million Korean won ($370,000).

The proposed Digital Asset Basic Act would establish licensing requirements for stablecoin issuers. The legislation includes provisions for reserve management and user protection measures.

Government Pushes Monetary Sovereignty

Democratic Party leaders argue that South Korea needs its own stablecoins to maintain monetary sovereignty. They worry that foreign dollar-pegged tokens like USDT and USDC are dominating local crypto markets.

These foreign stablecoins accounted for over 57 trillion won ($42 billion) in trading volume during the first quarter of 2025. Party lawmakers warn this reliance could undermine domestic financial policy control.

Min Byeong-deok, head of the Digital Asset Committee, said Korea risks falling behind in stablecoin development. He argued the stablecoin market could become larger than artificial intelligence or semiconductor industries.

The government wants to establish regulatory frameworks that support compliant domestic stablecoin issuers. Officials believe local stablecoins will give Korea more control over its digital currency ecosystem.

Stock markets showed mixed reactions to the CBDC suspension news. KakaoPay shares fell 7% while KB Financial Group gained 0.8% as investors weighed the shift toward stablecoins.

The Bank of Korea will continue monitoring legislative progress on stablecoin regulation while keeping CBDC development on hold. Banks reported being informed that CBDC discussions would remain paused as authorities focus on private stablecoin frameworks.