- South Korea’s central bank has paused its CBDC trials as the government shifts focus toward promoting stablecoins, following President Lee Jae-myung’s crypto-friendly agenda.
- Participating banks cited high costs and unclear commercialization plans, while several are now prioritizing the launch of a won-backed stablecoin by next year.
South Korea’s central bank has temporarily halted its central bank digital currency (CBDC) testing program, shifting focus amid rising government support for stablecoins. The move signals a major pivot in the country’s digital finance strategy as newly elected President Lee Jae-myung pushes forward a pro-crypto agenda.
According to reports from Yonhap News Agency and The Chosun Daily, the Bank of Korea informed participating banks that the second phase of CBDC trials, initially scheduled for later this year, has been postponed. The decision comes just months after the first testing phase wrapped up in June.
A senior official from one of the seven banks involved in the trials told Yonhap that the central bank is now waiting for more clarity on the government’s plans for stablecoins and how a CBDC would coexist with them. The uncertainty stems in part from the government’s growing openness to stablecoin issuance, seen as a potentially more profitable path for banks.
President Lee, who recently came into office, made multiple crypto-friendly promises during his campaign, most notably, allowing the issuance of Korean won-backed stablecoins. Earlier this month, his party introduced a bill that would allow companies with at least 500 million Korean won (around $370,000) in capital to issue such tokens.
For many of the participating banks, the CBDC program has proven costly and unclear. According to insiders, banks have expressed frustration over the high expenses associated with the trials and the lack of a clear commercialization roadmap from the Bank of Korea. One official even stated the second stage of the pilot was “on the verge of collapse.”
As a result, the central bank is now considering delaying the next phase until early next year and may reduce the number of financial institutions involved. The first phase of testing included 100,000 participants using CBDC for payments at merchants such as convenience store chain 7-Eleven, with future phases expected to include remittances and more retail applications.
Meanwhile, interest in stablecoins is heating up. Just last week, eight South Korean banks, including KB Kookmin, Shinhan, Woori, and NongHyup — announced plans to collaborate on a Korean won-backed stablecoin, targeting a launch by 2026.
The market reacted swiftly to the news. Shares of fintech firms such as KakaoPay and Hecto Financial dipped by 7% and 5%, respectively, amid concerns about the future of CBDC development. Conversely, banking giants KB Financial Group and Shinhan Financial saw modest gains, likely due to their involvement in the upcoming stablecoin initiative.
As the regulatory and financial landscape continues to evolve, South Korea’s digital currency future appears increasingly aligned with stablecoins over central bank-issued alternatives.