The South Korean central bank has temporarily halted its central bank digital currency (CBDC) project due to the rapid increase in stablecoin usage and government support in the country. South Korea's Central Bank (BOK) Halts CBDC Project BOK has informed banks participating in the CBDC pilot program called “Hangang” that the second phase of testing has been postponed. The development comes as the first phase of the rollout, which will allow 100,000 citizens to shop with digital currency at local retailers, is nearing completion, having been launched in April 2025. The pilot program was run in partnership with major local banks. Cost Burden and Uncertainty on Banks Were Factors While it was stated that each of the banks participating in the CBDC pilot program spent an average of 5 billion Korean won (about $3.7 million), the fact that the implementation was so costly without a clear rollout plan created a significant burden for the banks. It was reported that BOK informed banks that they will monitor the legal regulations regarding stablecoins and that it is not clear how CBDC, stablecoins and bank deposit tokens can co-exist. Behind the shift from CBDC to stablecoins are newly elected President Lee Jae Myung’s statements supporting stablecoin issuance. Lee had made the legalization of stablecoin issuance pegged to the Korean won and the development of the local stablecoin market an election promise. In this context, MP Min Byeong-deok, who was the name responsible for digital assets in the election campaign, introduced a bill that would create a licensing regime and regulatory framework for stablecoin issuers. The volatility in the stablecoin market has also spurred action from major tech giants, with two major South Korean tech companies, Kakao and Naver, applying for stablecoin trademarks through their payment apps. Additionally, eight of the country’s leading banks, including those participating in the CBDC pilot program, are reportedly preparing to form a joint venture to jointly issue a stablecoin pegged to the Korean won. *This is not investment advice. Continue Reading: South Korea's Central Bank Temporarily Halts Its Digital Currency (CBDC) Project! Here's Why
