Key Takeaways
- The Bank of Korea paused its central bank digital currency project in the second quarter of 2025.
- The decision is not a cancellation but a strategic pause to reassess the CBDC’s design, scope, and rollout plan.
- The BoK argues issuance should remain limited to regulated banks, citing monetary policy control and forex stability concerns.
- If stablecoin issuance expands beyond banks, the BoK could lose some visibility and control over the money supply.
In the second quarter of 2025, the Bank of Korea (BoK) quietly halted one of its most ambitious projects — the digital won.
Once pitched as a central bank digital currency (CBDC) that would modernize payments, bolster financial inclusion, and keep Korea competitive in the global fintech race, the initiative is now officially on hold.
The pause isn’t the same as a burial, but it sends a clear signal: timelines are shifting, priorities are being reassessed, and the private sector is moving fast to fill the gap. The decision also reflects a pragmatic calculation.
Participating banks — including KB Kookmin, Shinhan, Hana, Woori, NH NongHyup, and Industrial Bank of Korea — reportedly spent about ₩35 billion (USD 26 million) during the first testing phase and voiced concerns over the ongoing costs and lack of a clear path to commercial benefit.
With commercial lenders wary of pouring more capital into systems that could cannibalize their own deposits and fee structures, the BoK opted to pause rather than push forward with an under-supported pilot. That leaves a clear window of opportunity for a new class of financial instruments to take the stage: privately issued stablecoins.
Why the Digital Won Project Was Suspended
The BoK’s CBDC roadmap had initially envisioned a gradual rollout, moving from small closed-loop experiments to broader public pilots. But by early 2025, cracks in the plan began to show.
- High costs and technical demands: Implementing a CBDC requires secure, scalable infrastructure capable of supporting real-time transactions at a national level. For commercial banks, integrating these systems meant significant investment in IT upgrades, cybersecurity, and compliance layers.
- Uncertain commercial benefits: Banks questioned whether CBDC adoption would deliver enough new revenue streams to justify the outlay. In some models, a widely used CBDC could reduce bank deposits, impacting lending capacity.
Significantly, BoK officials have stressed that the project isn’t dead. Instead, it’s undergoing a strategic pause to reconsider the design, scope, and stakeholder alignment — a pause that could last several years.
Enter Stablecoins: Private Sector Takes the Lead in South Korea
With the Bank of Korea’s digital won on pause, private companies are stepping into the digital currency gap immediately. Firms are preparing won-pegged stablecoins across the financial and technology landscape that could hit the market years before the central bank resumes its CBDC program.
The momentum spans multiple sectors. Payment platforms like Toss, Kakao, Naver,and LG CNS are exploring stablecoin integration to enable instant, low-cost domestic and international transactions. Blockchain companies are moving quickly to secure intellectual property, filing trademarks for KRW-linked tokens and forging partnerships with traditional finance to ensure compliance and liquidity support.
Meanwhile, commercial banks and crypto exchanges discuss plans to launch their stablecoin products by 2026. KB Kookmin, Shinhan, Woori, NongHyup, Industrial Bank of Korea, Suhyup, and Standard Chartered Korea plan to introduce a stablecoin as early as late 2025 or early 2026, aiming to offer a domestic alternative to widely used dollar-based stablecoins such as USDT and USDC.
Benefits of KRW-Pegged Stablecoins for Banks and Exchanges
- For banks, stablecoins present a chance to modernize payment infrastructure, defend market share against fintech challengers, and potentially open new revenue streams in tokenized deposits and cross-border settlement.
- For exchanges, they offer a native asset that can improve on-platform liquidity and facilitate smoother conversions between Korean won and global dollar-backed stablecoins like USDT and USDC.
If timelines hold, South Korea’s first wave of private won-stablecoins could debut within the next 18 months, well ahead of any renewed digital won pilot, reshaping the competitive environment and testing the regulatory framework in real time.
While the Bank of Korea has halted its digital won, the private sector is moving at full speed toward KRW-pegged stablecoins. Several large-scale initiatives, spanning traditional banks, major exchanges, and blockchain-native companies, target launches between late 2025 and 2026.
South Korea’s Stablecoin Race: Banks, Exchanges, and Blockchain Firms Gear Up for 2025–26
Government-Bank Consortium (Target: Late 2025–Early 2026)
A coalition of eight central commercial banks, such as KB Kookmin, Shinhan, Woori, Nonghyup, Suhyup, corporate banking divisions, Citibank Korea, and SC First, has teamed up to develop a won-pegged stablecoin under a shared infrastructure.
Two models are under legal review:
- Trust-based structure, where assets are held in a legally protected trust for token holders.
- 1:1 deposit-backed token, fully collateralized by Korean won deposits at participating banks.
These stablecoins would be issued under broad regulatory oversight separate from the CBDC framework, giving them more operational flexibility. Pending legislation and full banking integration, launch is targeted for late 2025 or early 2026.
Upbit + Naver Pay Initiative
South Korea’s largest crypto exchange, Upbit, is partnering with fintech powerhouse Naver Pay to create a KRW-stablecoin designed to streamline domestic-to-global crypto flows.
One of its primary goals is to reduce the kimchi premium—the recurring price gap between cryptocurrencies traded in Korea and global markets—by enabling direct, low-friction swaps between KRW coins and leading dollar stablecoins like USDT and USDC.
This initiative is closely aligned with upcoming stablecoin regulatory reforms and the evolving exchange landscape, and it is positioned for rollout in 2025–26.
Kaia Blockchain’s “KRWKaia” / “KaKRW”
Kaia, a public layer-1 blockchain project, has filed trademark applications for two KRW-pegged stablecoin brands—KRWKaia and KaKRW.
Unlike purely centralized bank-issued tokens, Kaia’s design envisions a DeFi-native, KRW-denominated asset that could power on-chain payments, cross-border commerce, and decentralized finance products.
Kaia is actively discussing with South Korean financial institutions to ensure regulatory compliance and banking interoperability. It aims for a hybrid model that blends private-sector innovation with formal oversight.
Regulatory Battlefield: Central Bank vs. Lawmakers
The rollout of private won-stablecoins is already sparking a political and regulatory tug-of-war.
- Lawmakers from both ruling and opposition parties have floated proposals to allow any company with equity of at least ₩500 million to issue KRW-stablecoins.
- The Bank of Korea, however, maintains that only tightly regulated commercial banks should have that privilege, citing risks to monetary policy control and potential disruption in foreign exchange flows.
- A proposed pan-government committee could act as the licensing authority, balancing market growth with systemic safeguards.
This standoff will likely shape who gets to issue stablecoins and the speed and scale of adoption in Korea’s financial ecosystem.
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Korea’s Stablecoin Push Already Reshaping Capital Flows
The policy debate isn’t happening in a vacuum — capital flows and market behavior are already shifting.
- Capital flight concerns: In the first quarter of 2025 alone, ₩57 trillion worth of dollar-backed stablecoins moved offshore from Korean exchanges, underscoring how quickly digital assets can bypass traditional banking rails.
- Equity market plays: Stocks tied to digital payments and blockchain infrastructure — including Kakao Pay, LG CNS, and ME2ON — have surged as investors bet on stablecoin-driven growth. The KOSPI gained about 30% in the first half of 2025.
Beyond Regulation: How Won-Stablecoins Could Reshape Korea’s Monetary Playbook
- Monetary policy implications: If stablecoin issuance spreads beyond banks, the BoK could face reduced visibility and control over the money supply, complicating interest rate management and increasing vulnerability to currency volatility.
- Domestic innovation: Won-stablecoins could transform payments, DeFi adoption, and e-commerce — enabling faster settlement, lower costs, and better cross-border integration.
- Competitive positioning: Allowing private stablecoins could keep Korea competitive with markets like the EU, U.S., and Hong Kong, where regulated stablecoin frameworks are already advancing.
How Trump’s Anti-CBDC Gambit Is Reshaping South Korea’s Digital Currency Future
It took just one signature to derail one of the most hyped financial experiments of the decade. In January 2025, the United States, under President Donald Trump, didn’t merely step away from a CBDC.
According to Bepi Pezzulli, Associate Professor in the MBA Programme at University Canada West and a solicitor specializing in cryptofinance, says the ripple effects were immediate, “It slammed the door shut, bolted it, and hung a sign reading: “For Private Use Only.”
The executive order banning any federal agency from “establishing, issuing, or promoting” a CBDC wasn’t just policy, it was a declaration that the future of digital money would be shaped in the private sector, not by government.”
“South Korea got the message,” Pezzulli notes, “and acted with unusual speed.”
“This was not some symbolic delay,” Pezzulli stresses. “It was a conscious decision to step back from something costly, complex, and. at least for now, unnecessary.”
Instead, the government will allow regulated banks to issue won-pegged stablecoins, with plans to eventually include non-bank issuers.
“Rather than chase a central bank-issued token, the government would allow regulated banks to issue won-pegged stablecoins,” Pezzulli tells CCN.
As the expert explains, a CBDC is “an attempt to replicate physical cash in purely digital form—issued, guaranteed, and potentially surveilled by the central bank.”
According to him, programmability is the most controversial feature:
“In the wrong hands, it’s a financial panopticon,” he warns. “In the right hands, it’s still an enormous temptation for control.”
Furthermore, Trump’s stance preserves the state as regulator but leaves issuance to banks, fintechs, and corporates—fully backed, pegged, and audited. Pezzulli sees Seoul’s shift as aligning with this model:
“Advanced economies with mature banking and payment rails simply don’t gain much from a CBDC unless the goal is for the state to take a direct role in consumer transactions.”
If widely adopted, this approach could produce a network of interoperable, privately issued stablecoins in allied currencies—competing with CBDCs but without their political baggage.
“Trump isn’t just rejecting the CBDC; he’s daring the world to imagine digital money without the central bank as landlord.”
South Korea’s pivot suggests that dare is gaining traction—and the future of money here may be minted, audited, and redeemed in the open marketplace.
Korea Nears Stablecoin Crossroads as CBDC Stays on Ice
Industry watchers expect the first wave of private won-pegged stablecoins to hit the market by late 2025 or early 2026. Meanwhile, the BoK keeps its CBDC program in cold storage — ready to thaw if market conditions or technological advances make a relaunch attractive.
Legislative hearings, public consultations, and regulatory drafts will likely dominate the conversation in 2025–26, as Korea decides how far to let the private sector take the lead in digital currency innovation.
Conclusion
The coming years will test how South Korea balances financial innovation with monetary stability. Whether private stablecoins become a complement to, or a substitute for, the Bank of Korea’s CBDC, their integration into the financial system will hinge on clear regulatory frameworks, coordinated oversight, and market readiness.
The outcome could redefine how the Korean won circulates in both domestic and global digital markets.
FAQs
The BoK halted the CBDC pilot in Q2 2025 due to high infrastructure costs, limited commercial incentives, and lukewarm participation from banks. Lenders were hesitant to invest in systems that might reduce deposits and transaction fees, and policymakers chose to re-evaluate rather than push forward without full support.
Major banks, fintech platforms, and blockchain firms are accelerating plans for KRW-pegged stablecoins, which could hit the market before 2026. Projects include a government–bank consortium stablecoin, an Upbit–Naver Pay initiative to reduce the kimchi premium, and Kaia Blockchain’s DeFi-native KRWKaia/KaKRW tokens.
This is still contested. Lawmakers have suggested allowing any company with equity of at least ₩500 million to issue stablecoins, while the BoK argues that issuance should be limited to regulated commercial banks to protect monetary policy and foreign exchange stability. A pan-government licensing committee is being discussed.
Opportunities are represented by faster and cheaper payments, new DeFi applications, and better cross-border integration could boost Korea’s fintech competitiveness. On the other hand, risks are capital flight, currency volatility, and reduced central bank oversight if issuance spreads beyond banks. Investors must also consider issuer credit risk and evolving regulation.
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Giuseppe Ciccomascolo began his career as an investigative journalist in Italy, where he contributed to both local and national newspapers, focusing on various financial sectors.
Upon relocating to London, he worked as an analyst for Fitch's CapitalStructure and later as a Senior Reporter for Alliance News. In 2017, Giuseppe transitioned to covering cryptocurrency-related news, producing documentaries and articles on Bitcoin and other emerging digital currencies. He also played a pivotal role in establishing the academy for a cryptocurrency exchange website. Crypto remained his primary area of interest throughout his tenure as a writer for ThirdFloor.
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