Local reports indicate that South Korea’s central bank has suspended its central bank digital currency (CBDC) pilot program, pivoting the nation’s focus toward a private, bank-led stablecoin initiative.

The Bank of Korea (BOK) halted its “Project Han River,” following mounting pressure from commercial banking partners who cited prohibitive costs and the absence of a viable business model, as The Korea Herald reported.

The project launched earlier this year was a two-tier system involving a wholesale CBDC for interbank settlement and tokenized deposits for retail use by 100,000 citizens. However, the seven participating banks collectively spent nearly 35 billion won (about $26 million) on the initial three-month phase and were unwilling to proceed without a clear path to profitability.

A last-minute offer from BOK Governor Rhee Chang-yong to cover half the costs for the project’s second phase was rejected, signaling that the banks’ concerns were fundamental to the business case, not just the expense.

In the vacuum left by the state-led project, a consortium of eight major commercial banks, including KB Kookmin, Shinhan, and Woori, has formed to develop a won-pegged stablecoin. This initiative is actively supported by the Korea Financial Telecommunications and Clearings Institute (KFTC) and aims for a public launch in late 2025 or early 2026.

The banks see a clear commercial advantage in issuing their own stablecoins, leveraging their customer base to create new revenue streams and prevent disintermediation from fintech rivals or a state-run currency.

This strategic pivot was enabled by a shift in government policy under President Lee Jae-myung, who campaigned on a pro-crypto platform that included a promise to approve won-pegged stablecoins.

President Lee’s administration is fast-tracking the “Digital Asset Basic Act,” legislation that provides a legal framework for stablecoins. The act notably grants primary regulatory authority to the Financial Services Commission (FSC), not the Bank of Korea, and sets a low capital requirement of ₩500 million (about $370,000) to encourage competition.

The private sector has moved aggressively to secure its position. KB Kookmin, the nation’s largest bank, filed for 17 different trademarks for potential stablecoin tickers like KBKRW, which it called a “preemptive move.” Meanwhile, Shinhan Bank has been preparing for this moment for years, conducting international remittance proofs-of-concept with stablecoins as far back as November 2021.

While BOK Governor Rhee has publicly conceded that won-backed stablecoins are necessary, he and other central bank officials continue to express grave concerns. They warn that a proliferation of private stablecoins could undermine monetary policy, create systemic risk reminiscent of the 2022 Terra/Luna collapse, and accelerate capital flight as users swap won-stablecoins for dollar-pegged alternatives.

The volume of USD-pegged stablecoin transactions in Korea reached ₩56.95 trillion ($41.6 billion) in the first quarter of 2025 alone.

The central bank has advocated for a more cautious rollout, preferring that only highly regulated banks be allowed to issue stablecoins initially before expanding to non-bank entities.

In the meantime, the BOK has framed its suspended CBDC work as a potential “countermeasure to stablecoins,” a public option to be revived if the private market proves too volatile.

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