South Korea has paused its central bank digital currency (CBDC) testing to prioritise the development of won-backed stablecoins. The Bank of Korea (BOK) has suspended its digital currency pilot, “Project Han River,” citing cost concerns and unclear commercialisation strategies. This marks a significant shift in the nation’s approach, reflecting growing political and industry support for private stablecoins over government-issued digital currencies.
Seven participating banks involved in the project have been informed of the suspension. The testing, initially slated for Q4 2025, will remain on hold as authorities reassess the feasibility and role of CBDCs in Korea’s digital economy.
Banks Resist High Costs of CBDC Trials
The decision to halt Project Han River follows significant pushback from banks regarding the high costs of the CBDC pilot. Participating banks criticised the lack of clear profit models, making the initiative financially untenable. A senior banking official revealed that the second phase of the trials was “on the verge of collapse” due to growing dissatisfaction among banks.
Lee Jae-myung made multiple crypto-related promises during his presidential campaign, including allowing stablecoins – Source: CoinTelegraph
In contrast, stablecoin development has emerged as a more viable alternative. Eight major banks, including KB Kookmin and Shinhan, have already launched a joint initiative to develop won-backed stablecoins. The clear profit potential and lower operational costs of stablecoins make them a more attractive option for financial institutions.
Political Backing for Stablecoin Regulation
The administration of President Lee Jae-myung has strongly supported the pivot towards stablecoins. Under the new regulatory framework, companies with equity capital of ₩500 million ($370,000) can issue won-backed stablecoins. This strategic decision underscores the government’s recognition of stablecoins as critical tools for maintaining monetary sovereignty.
Korean banking consortium meeting – Source: Kedglobal
Min Byeong-deok, head of the Digital Asset Committee, emphasised the potential of stablecoins, stating, “The market for stablecoins could surpass even artificial intelligence or semiconductors.” This political endorsement aligns with broader efforts to counter the dominance of foreign stablecoins, which accounted for ₩57 trillion ($42 billion) in trading volume in Q1 2025 alone.
Reassessing CBDCs and Exploring Private Solutions
Despite the pause in testing, the Bank of Korea continues to research CBDCs and monitor developments in stablecoin implementation. By prioritising private sector solutions, the government aims to address immediate market needs while reassessing the long-term viability of a national digital currency.
The suspension of Project Han River provides regulators with valuable time to evaluate market conditions and refine their strategy for digital assets. Should stablecoins prove effective in achieving monetary goals, they may overshadow CBDCs as South Korea’s preferred digital currency model.
A Step Towards Pragmatism
South Korea’s decision to pause its CBDC pilot highlights a pragmatic approach to digital finance. By focusing on won-backed stablecoins, the country is leveraging private innovation to address regulatory and economic challenges. This strategic pivot could serve as a blueprint for other nations exploring the intersection of stablecoins and central bank digital currencies.
