South Korea’s central bank, the Bank of Korea (BoK), has announced a temporary suspension of its central bank digital currency (CBDC) project, marking a significant shift in South Korea’s digital currency landscape as regulatory and industry attention pivots toward the development and regulation of won-backed stablecoins.

CBDC Trials on Hold:

On June 30, the Bank of Korea notified the participating banks that it would pause preparations for the second phase of its digital won pilot, which had been scheduled for the fourth quarter of 2025. The decision follows the completion of the first phase of CBDC simulation testing, which involved 100,000 participants transacting with the digital currency between April and June 2025. The next stage was set to expand merchant participation and introduce remittance features, but mounting concerns from banks over the high costs of participation and the absence of a clear commercialization roadmap prompted the central bank to reassess its priorities.

Rising Momentum for Stablecoin

This temporary pause comes as South Korea’s financial sector and policymakers increasingly favour stablecoins over a state-issued CBDC. Current South Korean President Lee Jae-myung, inaugurated earlier this month, has championed the institutionalization of stablecoins as a cornerstone of his digital finance agenda. His administration recently introduced a “Stablecoin Bill”  that would allow companies with a minimum equity capital of 500 million Korean won to issue won-backed stablecoins.

The National Assembly and private sector of South Korea have shown growing enthusiasm for stablecoins, with major banks and blockchain associations actively exploring their issuance. Industry groups such as the Open Blockchain & Decentralized Identifier Association (OBDIA), which includes South Korea’s leading commercial banks, are accelerating discussions and partnerships around stablecoin projects.

Regulatory Shifts

The Bank of Korea’s suspension is also a response to the evolving regulatory environment. Authorities are now focused on establishing a comprehensive framework under the proposed Digital Asset Basic Act, which outlines licensing requirements, reserve management, and user protection for stablecoin issuers. This legislative momentum has led the central bank to minimize policy uncertainty by pausing further CBDC testing while regulators and industry stakeholders debate the potential coexistence of CBDCs and stablecoins.

Global and Regional Context

South Korea’s recalibration reflects a broader trend among central banks worldwide. While countries like the Bahamas, Jamaica, and Nigeria have launched CBDCs, others are increasingly focusing on regulating stablecoins rather than rolling out their own digital currencies. The Bank of Korea’s decision highlights growing skepticism among central banks about the necessity of CBDCs in the face of private sector innovation and the practical advantages of stablecoins, such as lower transaction costs and faster settlements.

For now, the Bank of Korea will continue to monitor legislative developments and the evolving digital asset ecosystem before deciding whether to resume its CBDC pilot. Meanwhile, South Korean banks are expected to intensify their stablecoin initiatives, aiming to launch the first wave of won-backed tokens as early as next year.

Final Thoughts

As the regulatory landscape evolves and the private sector’s role expands, South Korea’s approach may lead other advanced economies weighing the benefits and risks of state-backed digital currencies versus private stablecoins. The coming months will be critical in determining whether the digital won will return to center stage or stablecoins will define the next chapter of Korean digital finance.