Bank of Korea Halts CBDC Project Amid Stablecoin Rise
South Korea's central bank, the Bank of Korea (BOK), has temporarily paused its Central Bank Digital Currency (CBDC) project as local stablecoins gain traction, backed by President Lee Jae Myung's administration. The decision was announced soon after the initiation of the Hangang CBDC pilot, which allowed 100,000 citizens to use digital currency. The pause allows the BOK to assess stablecoin legislation and integration challenges. The initial pilot involved significant financial input from local banks, each spending around 5 billion Korean won. As stablecoin adoption accelerates, proposed legislation aims to establish regulations for issuers. Major IT firms like Kakao and Naver and prominent banks are moving to create a Korean won-based stablecoin. The BOK supports stablecoin initiatives, provided there are risk-management strategies. This trend in South Korea is similar to developments in the U.S. with the GENIUS Act.
FAQ
❓ Why did the Bank of Korea pause its CBDC project?
The pause allows the Bank of Korea to evaluate stablecoin demand and regulatory developments, as well as financial burdens on banks.
❓ What is influencing South Korea's shift to stablecoins?
Political support and new legislation promoting Korean won-pegged stablecoins are key influences, along with initiatives by major tech and financial institutions.
❓ How do stablecoins affect local banks?
Banks faced financial burdens from CBDC trials and are now exploring stablecoin initiatives for potentially lower costs and regulatory support.