South Korea’s central bank paused its central bank digital currency (CBDC) project after President Lee Jae Myung’s endorsement of private stablecoins tied to the Korean won quickly gained momentum.
Yonhap News Agency reported that the BOK (Bank of Korea) informed banks taking part in the Hangang CBDC initiative that talks on a second phase of digital currency roll-out have been put on hold.
The halt comes less than 3 months after the BOK started the Hangang pilot program, which let 100,000 citizens make payments with the state’s CBDC at local shops. Major domestic banks teamed up with the central bank for the trial, which is set to wrap up this month.
In its notice to participating banks, the BOK said it would watch new stablecoin rules closely, noting that it is not yet clear how CBDCs would integrate with stablecoins along with bank deposit tokens, and work together.
Banks that joined the pilot took on high costs with no clear path to a full launch. On average, each of the seven banks spent $3.7 million on the project, Yonhap added.
President Lee Jae Myung continues to push won-backed stablecoins
The move toward stablecoins follows a pledge by President Lee Jae Myung to legalize the issue of Korean won-backed stablecoins and boost the stablecoin market in the company. The long-term goal is to prevent capital from moving into foreign stablecoins.
Shortly after the election, Min Byeong-deok, a lawmaker from the ruling party who oversaw digital assets in Lee’s campaign, put forward a bill to create a licensing system and rules for stablecoin issuers.
The push gained steam when Naver and Kakao, two major IT companies in South Korea, filed trademark applications for stablecoins linked to their mobile payment services. Local media say eight top banks, including those in the CBDC pilot, plan to form a joint venture to issue a won-based stablecoin.
The Bank of Korea itself has spoken positively about won-linked stablecoins. Governor Lee Chang-yong says that he anticipates a growing demand for such assets, as long as the right safeguards exist for any risks.
South Korea’s rush into stablecoins is similar to moves in the United States. There, the GENIUS Act is moving quickly through Congress to set rules for US dollar stablecoins under Trump.
As of now, South Korea is also among the world’s biggest in spot crypto trading. Government data shows that by last year’s end, over one in every five South Koreans owned and traded cryptocurrencies.
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