South Korea pauses CBDC testing to shift focus to domestic stablecoins

The Bank of Korea (BOK) has decided to suspend the second phase of the national digital currency testing project (CBDC), as the stablecoin pegged to the won is receiving strong support from the government.

According to Yonhap, the BOK has informed the banks participating in the Hangang CBDC project that they will monitor the legal process related to stablecoin before proceeding with the implementation. The first phase of the trial, involving 100,000 residents using CBDC at local stores, is expected to conclude this month.

High implementation costs — approximately 5 billion won (3.7 million USD) per bank — and the lack of a specific plan are putting financial pressure on many banks. Meanwhile, large companies such as Kakao, Naver, and 8 major banks in South Korea are collaborating to develop a stablecoin pegged to the won.

New President Lee Jae Myung has committed to legalizing the issuance of domestic stablecoins in order to prevent capital flight, while also promoting a new legal framework for this sector. The BOK has also expressed goodwill towards stablecoins if the risks are adequately controlled.