David Edwards
South Korea’s central bank has temporarily suspended its central bank digital currency (CBDC) testing amid growing momentum for stablecoin initiatives supported by the newly elected administration and major financial institutions.
According to reports from Yonhap News Agency and The Chosun Daily, the Bank of Korea informed the seven participating banks that the second phase of CBDC trials—originally scheduled for later this year—has been postponed. The delay reflects the government’s shifting stance, with increasing policy emphasis on the issuance and integration of local currency stablecoins.
President Lee Jae-myung, inaugurated earlier this year, campaigned on a pro-crypto platform that included explicit support for stablecoins, particularly those pegged to the South Korean won. His party recently introduced legislation to allow corporations to issue stablecoins, subject to a minimum capital requirement of 500 million Korean won (approximately $370,000).
The central bank’s pilot CBDC project, which commenced in April, initially engaged 100,000 users to test digital payments using a central bank-issued won. While the first phase concluded at the end of June, the second phase was expected to broaden merchant participation and explore remittance capabilities. However, the initiative faced resistance from participating banks due to escalating costs and a lack of a clear commercialization strategy.
Industry sources cited by Yonhap revealed that dissatisfaction among banks nearly derailed the second testing phase. Financial institutions are reportedly more inclined to pursue proprietary stablecoin offerings, which present clearer revenue opportunities. Eight South Korean banks—including KB Kookmin, Shinhan, Woori, and NongHyup—are now collaborating to launch a won-backed stablecoin by 2026.
Market sentiment reacted to the CBDC pause, with shares of fintech players KakaoPay and Hecto Financial declining by 7% and 5%, respectively. In contrast, traditional banking groups like KB Financial and Shinhan recorded modest gains of 0.8% and 1.6%.
