- Bank of Korea suspends second phase of CBDC trials amid high costs and unclear commercialization plans.
- President Lee Jae-myung’s administration supports stablecoins backed by won with a new regulatory bill.
- Eight banks, including KB Kookmin and Shinhan, plan to issue a stablecoin by next year.
The Bank of Korea has suspended its central bank digital currency (CBDC) pilot program amid increased interest in private-sector stablecoins. The central bank began testing its CBDC in April, involving 100,000 participants who used the digital WON for payments.
Notably, this first phase concluded today, June 30. The second phase, initially scheduled for Q4, 2025, aimed to expand usage to more merchants and support remittance features.
Related: South Korea’s Ruling Party Denies State-Backed Stablecoin Plans
Why has Korea’s CBDC testing been halted
The Bank of Korea informed participating banks that the second round would be postponed, according to local media reports. The Bank is now considering moving the next phase to early 2026 with a reduced number of participants.
The move follows concerns raised by financial institutions over the cost of participation and the absence of a clear roadmap for commercial adoption. A senior official from one of the seven participating banks said the program was “on the verge of collapse” due to mounting dissatisfaction.
Notably, the policy direction marks a significant pivot following the collapse of the Terra stablecoin and Luna token in 2022. The experience has made regulators more cautious but also more supportive of tightly regulated stablecoin models.
Banks shift their focus now to private stablecoins
At the center of the transition is growing support for stablecoins from South Korea’s new President, Lee Jae-myung. During his campaign, Lee advocated for crypto innovation and pledged to support the development of won-pegged stablecoins.
Earlier this month, Lee’s party introduced a bill that would allow companies with a minimum capital of 500 million Korean won (about $370,000) to issue stablecoins. This has encouraged banks to redirect their digital currency strategies.
On Wednesday, local media reported that eight banks, including KB Kookmin, Shinhan, Woori, and NongHyup, plan to launch a won-backed stablecoin by 2026. Notably, these institutions were part of the initial CBDC trial but now see greater economic potential in issuing regulated stablecoins.
Ryoo Sang-dai, a Senior Deputy Governor at the Bank of Korea, stated that any rollout of stablecoins would happen in phases and remain under the oversight of regulated banks.
Korea market reaction
News of the CBDC trial suspension triggered mixed reactions in South Korea’s financial markets. Shares of KakaoPay Corp fell by 7%, and Hecto Financial dropped 5% amid uncertainty over the country’s digital currency future.
Meanwhile, stocks in major banks involved in the stablecoin plan saw gains. KB Financial Group rose by 0.8%, and Shinhan Financial climbed 1.6% on the day of the announcement.
Related: The Biggest Banks in South Korea Team Up to Create a New Crypto
While South Korea reconsiders its CBDC timeline, several countries have already launched digital versions of their national currencies. The Bahamas (Sand Dollar), Jamaica (Jam-Dex), and Nigeria (eNaira) are among the early adopters.
Meanwhile, the global interest in stablecoins continues to grow. In the United States, the Senate recently passed the “Guiding and Establishing National Innovation for US Stablecoins” (GENIUS) Act, which awaits a vote in the House of Representatives.
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