In a bold move towards crypto integration and innovation, eight major banks in South Korea are working with the Open Blockchain and DID Association and the Financial Settlement Institute to establish a Korean won stablecoin joint venture. The collaboration signals a major step toward mainstream crypto adoption and reduced reliance on dollar-based coins in the traditional financial market.
The eight banks, including KB Kookmin, Citibank Korea, and the Industrial Bank of Korea, will establish a joint won-backed stablecoin. This project is the first time that the banking industry has entered the digital asset field in the form of a consortium. This reflects a growing global trend of launching stablecoin initiatives to modernize payment systems. The initial plan includes two stablecoin models: trust-based and deposit-linked.
The CBN Backs Won Stablecoins
South Korea’s central bank publicly endorsed a rollout of won-backed stablecoins for licensed banks and finally private entities. In response, eight leading banks have made a swift move to set up a joint venture to develop a private-sector won stablecoin.
The latest news indicates that private entities are gradually shifting into digital assets. With the issuance of a privately-issued stablecoins, Korea’s financial landscape will expand its influence in global payment and remittance. However, discussions are still ongoing, and establishment may become a reality by the end of 2025 or early next year.
Method of issuing is still under discussion too, but two plans have been identified – a trust model and the deposit token model. The former will issue coins after separately entrusting customer funds, while the latter will issue coins based on 1:1 with bank deposits.
Won-Backed Stablecoin will Retain Monetary Control
South Korea faces a massive foreign capital influx in stablecoins, which could potentially harm the economy and cross-border remittances. A South Korean banking official said the massive inflow will lead to foreign dollar coins dominance in the domestic market. He added, “it’s time to secure the independence and competitiveness of the domestic financial system through a won-based digital currency.”
A domestic stablecoin will keep value within the economy and support monetary sovereignty. In addition, a won-backed stablecoin issued through banks will have built-in KYC/AML compliance, fostering trust between users and financial institutions. Furthermore, a domestic stablecoin will boost digital payments by enabling 24/7 retail transactions and cross-border remittances. This will also reduce reliance on aging banking.
The won-backed stablecoin initiative is also in line with the Basic Digital Asset Act proposed to the Legislative Chamber. The bill introduces the stablecoin authorization system and also announces a second-stage roadmap for institutionalizing virtual assets in Q2 2025.
There are concerns about the launch of privately-issued stablecoins and the CBDC in the financial sector, and whether the won-backed project can balance the domestic ecosystem. It’s essential to note that the private-sector-backed stablecoin differs from the CBDC designed by the central bank. Policymakers are still discussing the technological and operational infrastructure, and if the central bank will be involved.
Impacts of a Won Stablecoin Joint Venture on Crypto
The joint venture by South Korean banks will set a precedent for institutional entry. It will serve as a push for other banks to integrate crypto into their infrastructure, paving the way for global adoption. Furthermore, Won-backed stablecoin could serve as a model for other emerging economies seeking sovereignty.
However, the FSC and other regulators must agree on a framework that governs issuance, reserves, oversight, and transactions to ensure the stablecoin maintains its peg. This will prevent market instability. Experts expect more synergy between banks and crypto companies, as digital asset expansion continues.