Bank of Korea Pauses CBDC Project Amid Growing Interest in Stablecoins
The Bank of Korea (BOK) has decided to temporarily halt its Central Bank Digital Currency (CBDC) initiative. This decision comes as the South Korean government places greater emphasis on the development and regulation of stablecoins. The shift in priorities has left many project participants without a long-term strategy, prompting banks to explore opportunities within the stablecoin sector.
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BOK Puts the Brakes on Second Phase of CBDC Testing
According to a report from Yonhap News Agency, the Bank of Korea has informed participating banks in the Han River Project of the suspension of the second phase of CBDC testing. The initial phase began in April, engaging 100,000 financial consumers, and was slated for completion by June 30. Initially, the second phase aimed to test peer-to-peer transfers, broaden merchant payment locations, and simplify authentication methods by the end of the year.
However, concerns over the “excessive cost burden without clear commercialization plans” have led to a pause in the project. Banks, shouldering the project’s expenses, have urged the Bank of Korea to provide a comprehensive long-term roadmap, including plans for commercialization. They have requested the formation of a ‘CBDC General User Real-Transaction Test Task Force’ to develop such a roadmap, adjusting the project schedule accordingly.
The Bank of Korea has recognized the need to clarify its internal position on digital assets. This comes amid growing momentum for stablecoins and heightened discussions in the National Assembly and the private sector. A senior official from a commercial bank mentioned that the BOK is taking a “wait-and-see” approach, as stablecoin legislation is progressing, but the distinctions and potential coexistence of CBDCs, stablecoins, and deposit tokens remain unclear.
Another official noted a significant shift towards stablecoins, with the atmosphere changing considerably after a dinner meeting between Bank of Korea Governor Lee Chang-yong and bank presidents on the 23rd. Nonetheless, there is a possibility of revisiting the Han River Project in 2026, as another bank official indicated that the BOK might resume CBDC testing in the first half of next year.
Banks Gear Up for Stablecoin Legislation
With the suspension of the CBDC project, banks involved are now expected to pivot towards stablecoin issuance as supportive legislation gains traction. Recently, Min Byeong-deok, a member of South Korea’s ruling party, introduced a comprehensive bill aimed at establishing a structured regulatory framework for crypto assets within the country.
The Democratic Party of Korea (DPK) lawmaker’s proposed Digital Assets Basic Act is designed to complement the Virtual Asset Investor Protection Act, providing a broader legal foundation for the industry. It emphasizes the implementation of a licensing system for stablecoin issuers and the establishment of clear regulations.
The banking sector is exploring a collaborative business model where banks might form a joint venture to issue stablecoins. They are also engaging with non-bank entities to prepare for legalization and issuance. A bank official expressed uncertainty about whether banks, big tech companies, or fintech firms will be the issuers of stablecoins, highlighting the necessity to prepare for all eventualities before legalization.
Collaboration with fintech companies is deemed essential for scalability. Banks are proactively discussing stablecoins not just with the Bank of Korea and other banks but also with payment companies, cryptocurrency exchanges, and blockchain firms to strategize for the future issuance of stablecoins.
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