South Korea pauses CBDC tests as stablecoin fever hits banks

South Korea has paused the second phase of its central bank digital currency (CBDC) pilot project as stablecoins gain renewed political and market momentum in the country. The Bank of Korea (BOK) informed participating banks that discussions related to the next stage of the CBDC pilot, initially planned for late 2025, would be temporarily suspended to reassess priorities amid shifting regulatory and market dynamics.

This decision coincides with a push by the new administration under President Lee Jae-myung to expand stablecoin issuance, proposing looser regulations that would allow companies with as little as 500 million won (~$370,000) in equity to issue won-backed stablecoins. The government sees stablecoins as playing a major role in South Korea’s evolving digital asset landscape.

Banks have expressed concerns about the high costs and unclear commercialization roadmap of the CBDC project, with investments of billions of won already made without a clear long-term plan. As a result, many banks are now shifting their focus toward stablecoin development, either individually or through industry consortia like the Open Blockchain & Decentralized Identifier Association (OBDIA), which includes major commercial banks.

The BOK remains cautious about the rapid adoption of stablecoins, emphasizing a gradual, bank-led rollout with strong consumer protections and measures to avoid market disruption, according to Senior Deputy Governor Ryoo Sang-dai.

South Korea is one of the world’s most active crypto markets, with over a third of the population involved in digital asset buying selling. Crypto holdings have become a significant part of personal wealth for millions, and enthusiasm for digital assets has even influenced stock market behavior, with shares of companies linked to the CBDC initiative experiencing notable rallies.

So, the country's pause on CBDC testing reflects a strategic reassessment amid growing stablecoin activity, regulatory developments, and commercial bank concerns, signaling a possible shift in the country’s digital currency roadmap toward greater stablecoin integration.

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