South Korea’s Major Banks Unite to Launch Won-Backed Stablecoin, Central Bank Urges Caution

Eight of South Korea’s largest banks have joined forces in a historic initiative to launch a stablecoin backed by the national currency – the Korean won. In cooperation with the Open Blockchain and DID Association and the Financial Settlement Institute, the country is taking a bold step toward digital monetary transformation, though its central bank is urging a more cautious approach.

🔹 Objective: A Digital Currency Pegged to the Won

According to local reports, the new won-backed stablecoin will be available in two models – one based on a trust system and another backed directly by bank deposits. This project marks the first significant joint effort by South Korean banks to enter the digital asset space via a consortium. “A won-pegged stablecoin can fill a market gap as an alternative to traditional payment methods like wire transfers or currency exchange,” said Sam Seo, chairman of the Kaia DLT Foundation. This initiative follows the election of President Lee Jae-myung and his reform agenda on crypto regulation. The proposed Digital Asset Basic Act aims to legalize stablecoins and modernize the digital finance landscape in South Korea.

🔹 Fears Over Dollar Dominance

The banks involved share concerns that foreign dollar-backed stablecoins could eventually dominate the Korean market. The won-backed stablecoin aims to maintain financial sovereignty and competitiveness. “If we don’t act now, foreign stablecoins could overwhelm the domestic market. We need to ensure the independence and strength of our financial system through a locally issued digital currency,” said a spokesperson from the banking consortium.

🔹 Central Bank Urges a Gradual Approach

Despite the enthusiasm from commercial banks, the Bank of Korea remains cautious. Senior Deputy Governor Ryoo Sang-dai recommends that the rollout start exclusively with heavily regulated commercial banks. “It’s advisable to first allow only well-regulated banks to issue won-backed stablecoins and then gradually expand to the non-banking sector based on the lessons learned,” he stated. The central bank emphasizes that stablecoins must not disrupt monetary policy or financial stability. It plans thorough risk assessments and aims to establish a strong regulatory framework to avoid future crises. This cautious stance aligns with the global trend of central banks carefully evaluating the implications of stablecoins.

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