CBDCs take priority as Bank of Korea starts new 2.50% policy cycle under Shin

South Korea’s central bank has entered a new monetary phase with digital currencies at the forefront, as newly appointed Bank of Korea governor Shin Hyun-song begins his four-year term with a strong focus on central bank digital currencies (CBDCs) while maintaining the benchmark interest rate at 2.50%.

In his inaugural address, Shin placed CBDCs and bank-issued deposit tokens at the center of the country’s future financial system, signaling a strategic shift toward state-backed digital money as a foundation for payments innovation.

The policy direction comes as the Bank of Korea holds rates steady at 2.50%, extending a cautious monetary cycle amid inflation risks, geopolitical uncertainty, and slowing growth.

Shin asserted that they plan to collaborate on international initiatives, including Project Agora, to boost the Korean won’s standing in global payments. Earlier, before his appointment, he had also advocated for a CBDC-centric ecosystem.

He commented, “Central Bank Digital Currency and commercial bank deposit tokens issued based on it must become the center of the digital currency ecosystem.” Thus, his recent address only formalizes his digital roadmap.

Has Shin adjusted his position on Korean won-pegged stablecoins? 

Shin emphasized that a CBDC-led ecosystem, supported by tokenized bank deposits, would play a “central role” in modernizing South Korea’s monetary infrastructure. His remarks highlighted ongoing initiatives such as Project Hangang, which is exploring real-world applications for digital currency and settlement systems.

In his earlier address during his nomination hearing, he mentioned he was in favor of stablecoins, though he cautioned about the need to maintain trust in the currency. He had also acknowledged that private stablecoins could complement official bank tokens, ensuring the digital ecosystem stays diverse and functional. 

However, in his recent speech, the new central bank governor did not mention Korean won–pegged stablecoins, raising concerns about his plan for the digital assets. 

For some time, South Korean lawmakers, under President Lee Jae-myung’s endorsement, have been pushing to establish regulations for domestic stablecoins under the Digital Asset Basic Act. KRW1 even entered the market in February as the country’s first fully regulated stablecoin, formed through a collaboration between BDACS and Woori Bank.

However, there has been some division between the ruling and opposition parties on parts of stablecoin regulation. Last year, Democratic Party lawmaker Ahn Do-geol proposed a framework to bar interest payments, while the People Power Party’s Kim Eun-hye introduced a rival bill that left out any restriction on interest.

Shin encouraged the central bank to be more prudent and careful in its decisions

Overall, in his first address, Shin advocated a careful, measured approach to monetary policy amid intensifying uncertainties from the Middle East crisis. He recognized that paths for inflation and growth are now significantly blurred, making it nearly impossible to predict future economic conditions.

He added that they will review policy tools to balance the difficult trade-offs between maintaining a stable won and supporting a cooling economy. He explained, “It has become increasingly difficult to fully identify and respond to risks in the financial system only using existing frameworks.”

Furthermore, he called for greater use of market price movements as a high-frequency early warning system to capture systemic shifts in a world where banks and non-banks are increasingly interconnected.

More recently, policymakers chose to maintain rates at 2.5% again following the fallout from the late February strikes on Iran, which have since mushroomed into a full-scale regional crisis. Their decision marks the seventh consecutive meeting in which they have held rates, effectively freezing any plans to lower borrowing costs as regional war risks take priority.

Shin had previously called for the same, saying that patience is the most powerful tool the BOK has at the moment. In his latest address, he reiterated his goal of maintaining financial stability and protecting trust in money and payments.