South Korea Suspends Digital Won Project amid Stablecoin Push

South Korea’s central bank has halted its digital currency testing project, raising doubts about the country’s central bank digital currency (CBDC) plans. As reported by Bloomberg, the Bank of Korea (BoK) told the participating banks that it has decided to pause talks on the initiative for now.

A Question Over the Digital Won’s Future

A central bank official also confirmed that the regulator has suspended preparations for the second phase of its digital currency pilot, which had been scheduled for the fourth quarter of 2025.

FinanceMagnates.com earlier reported that South Korea’s central bank completed the first phase of CBDC simulation testing in December 2021. That stage examined basic functions of the digital currency, such as creation, issuance, and distribution.

The Korean regulator began exploring a digital version of the won in April 2020. However, the BoK made it clear that its tests did not mean it intended to launch a CBDC.

As the future of the country’s CBDC comes into question, other countries are continuing to pilot digital currencies. So far, three countries—the Bahamas, Jamaica, and Nigeria—have gone ahead and launched digital versions of their national currencies.

Read more: The Evolution of CBDCs—What to Expect Next

Here is the status of country's CBDC initiative, according to Atlantic Council:

South Korea Shifts Focus to Stablecoins

The latest report highlighted that the decision to pause testing followed a shift in focus towards the growing stablecoin market, now a top issue for President Lee Jae Myung. He wants to support companies involved in stablecoins and has even proposed a bill allowing firms with equity as low as 500 million won (US$370,000) to launch won-pegged stablecoins.

Ryoo Sang-dai, a Senior Deputy Governor at the BoK, also confirmed last week that the rollout of stablecoins would happen in phases and be led by regulated banks.

South Korean crypto investors were previously affected by the collapse of the stablecoin Terra and its linked token, Luna, which was believed to have wiped out around half a trillion US dollars from the global crypto market.

South Korea is not alone in supporting the use of stablecoins. The recent stock market debut of Circle, the company behind USDC, shows that these currency-linked tokens are becoming more widely accepted. In the United States, the Senate recently passed the “Guiding and Establishing National Innovation for US Stablecoins” or GENIUS Act. The bill is now waiting for a vote in the House of Representatives, where more changes may be made before a final decision.