South Korea Halts CBDC Pilot as Banks Pivot to Stablecoins, Fueling a New Wave of Private Issuance

Central Bank Halts Pilot Over High Costs, Unclear Business Models

Local media reports say the Bank of Korea (BoK) recently informed seven participating banks that the second stage of CBDC testing would be “postponed indefinitely,” without providing a timeline. Executives cited steep testing costs and the absence of a clear commercial strategy, making it difficult for banks to justify further investment.

During the first phase of trials, which ran from April to June and focused on basic payment and settlement functions, each bank reportedly spent the equivalent of $2–4.5 million on infrastructure and marketing — totaling nearly $27 million overall. Expanding into use cases like cross-bank transfers, merchant integration, and fraud monitoring would have required even greater spending on technology and compliance, driving skepticism among participants.

Presidential Backing Spurs Private Stablecoin Projects

President Lee Jae-myung, who took office pledging crypto-friendly reforms, has prioritized support for privately issued stablecoins pegged to the Korean won. His administration introduced a legislative proposal in June allowing companies with capital over 500 million won (about $370,000) to issue won-based stablecoins, complete with a regulatory framework — a move offering businesses a clear commercial pathway that the CBDC lacks.

According to insiders, the BoK is also grappling with how to reconcile the roles of a state-issued CBDC, private stablecoins, and emerging commercial bank-issued tokens like deposit tokens. The central bank is reportedly considering internal restructuring of its CBDC division, signaling it has no immediate plans to resume aggressive CBDC development.

Banks Form Alliances to Launch Native Stablecoins

With the CBDC program on ice, South Korea’s banking industry is embracing stablecoins. Reports indicate that eight major banks — including KB Kookmin, Shinhan, Woori, and NongHyup — are planning a joint venture to develop a Korean won stablecoin, targeting a launch as early as 2025. The consortium aims to coordinate technology, compliance, and issuance strategies, positioning themselves at the forefront of Korea’s stablecoin ecosystem.

Blockchain investment giant Hashed is also rumored to be in talks with leading financial groups about issuing a “native Korean won stablecoin,” while banks explore partnerships with major payment providers like KakaoPay, blockchain companies, and exchanges to establish stablecoin infrastructure and adoption plans.

Market Reaction: Diverging Fortunes for Fintech and Banks

The CBDC freeze triggered an immediate market response. Shares of payment giants like KakaoPay tumbled nearly 9%, while Hecto Financial lost around 5%. By contrast, banking groups involved in stablecoin planning saw modest gains, with KB Financial rising 0.8% and Shinhan Financial climbing 1.6% — reflecting diverging investor sentiment on South Korea’s digital currency future.

Is There Still a Future for the Digital Won?

The BoK’s CBDC efforts aimed to build foundational infrastructure for the digital won, but the combination of high costs, shifting political priorities, and rapidly consolidating private-sector interest in stablecoins has left the project in limbo.

Whether there remains a role for a central bank digital currency — or if it will ultimately integrate with privately issued stablecoins — is set to become a key issue shaping South Korea’s digital asset policy in the years ahead.

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