South Korea halts CBDC project as regulators prioritize won-backed stablecoin rollout

South Korea’s central bank digital currency project has been put on hold as the regulators turn their attention to fast-tracking the issuance of won-backed stablecoins.

According to a Bloomberg report citing an unnamed Bank of Korea official, the central bank has suspended plans for the second phase of its CBDC pilot, which had been scheduled for the fourth quarter of 2025.

Participating banks have reportedly been informed that discussions would be temporarily paused. Authorities are reevaluating the role of a CBDC as they are pivoting toward regulating private stablecoin issuers, the official noted.

The Bank of Korea had been preparing to expand its CBDC testing under “Project Han River,” which began earlier this year with a consortium of seven banks.

The second phase was expected to include features such as peer-to-peer transfers and merchant payments. However, banks reportedly raised concerns over high costs and the lack of a clear commercialization plan, prompting the central bank to reassess the project’s future.

Instead, the central bank will continue to monitor progress on a legislative proposal that would establish a regulatory framework for Korean won-based stablecoins. The proposed legislation, introduced under the Digital Asset Basic Act, outlines licensing requirements for issuers and includes provisions for reserve management and user protection.

The move aligns with President Lee Jae-myung’s broader agenda to accelerate stablecoin development. Since taking office earlier this month, Lee has prioritised the institutionalisation of KRW-backed digital tokens as a strategic financial initiative. 

His administration supports a licensing regime that would permit companies with as little as ₩500 million ($370,000) in equity capital to issue stablecoins, subject to regulatory approval.

Democratic Party leaders have framed the rollout of won-denominated stablecoins as essential to preserving South Korea’s monetary sovereignty. 

Party lawmakers argue that local crypto markets are overly reliant on U.S. dollar-pegged assets like USDT and USDC, and warn that continued dominance by foreign stablecoins could undermine domestic financial policy.

These stablecoins reportedly accounted for over ₩57 trillion ($42 billion) in trading volume during the first quarter of 2025.

Min Byeong-deok, head of the Digital Asset Committee, has warned that without swift action, Korea may lag in the race for stablecoin leadership. 

He contends that the market for stablecoins could surpass even artificial intelligence or semiconductors and has called for regulatory measures to support issuance by compliant entities.

Commercial banks have already responding to this policy shift. Eight of the country’s largest banks, including KB Kookmin, Shinhan, Woori, and Nonghyup, have launched a joint initiative to issue a KRW-pegged stablecoin.