South Korea Halts CBDC Testing Amid Growing Stablecoin Support

The Bank of Korea has reportedly suspended the second phase of its CBDC testing as the government shows increasing support for local currency stablecoins. According to a report by The Chosun Daily on Monday, the central bank informed participating banks that the next stage of its CBDC trials , initially scheduled for later this year, will be postponed. A senior official at one of the seven participating banks stated that the central bank is waiting to understand the government’s plans for stablecoins and how a CBDC would align with the proposed framework. Newly elected President Lee Jae-myung has voiced support for stablecoins as part of his crypto-forward agenda, which includes allowing tokens that track the Korean won. Earlier this month, his party proposed a bill enabling companies with a minimum equity capital of 500 million Korean won ($370,000) to issue such tokens. Banks Raise Concerns Over High CBDC Costs Reports indicate that banks participating in the trials have grown increasingly dissatisfied with the high costs associated with the CBDC project, with some stating the second phase of testing was “on the verge of collapse.” Participating banks also expressed frustration over the lack of a clear commercialization plan for the CBDC from the Bank of Korea. In response, the central bank is reportedly considering shifting the second phase of the trials to the first half of next year and may limit the number of financial institutions involved. The initial stage of the CBDC pilot, which ran from April 1 to June 30, involved 100,000 participants testing payments using the digital currency. The planned second stage aimed to expand merchant participation and include remittance functions. However, several banks have shown a preference for focusing on their own stablecoin initiatives, which offer a clearer path to financial benefits compared to the CBDC trials. Stablecoin Initiatives Gain Traction in South Korea On Wednesday, it was reported that eight South Korean banks plan to launch a won-backed stablecoin by next year. Half of these banks, including KB Kookmin, Shinhan, Woori, and NongHyup, were participants in the first stage of the CBDC trials, indicating a potential shift in focus toward stablecoins. The suspension of the CBDC tests triggered mixed reactions in South Korea’s fintech market . Shares in KakaoPay Corp dropped 7%, while Hecto Financial saw a 5% decline on Monday. Meanwhile, KB Financial Group shares rose by 0.8%, and Shinhan gained 1.6%, reflecting the market’s cautious optimism toward stablecoin developments. The post South Korea Halts CBDC Testing Amid Growing Stablecoin Support appeared first on TheCoinrise.com .

Source: The Coin Rise