In a significant shift in its digital currency strategy, the Bank of Korea has decided to pause its Central Bank Digital Currency (CBDC) pilot program—Project Han River—to focus on developing a bank-led stablecoin initiative aimed at distributing over 110 trillion won in government subsidies more efficiently and transparently. This move reflects a growing trend among global central banks as they navigate the complexities of digital currency implementation.
Project Han River: From CBDC to Pause
The Bank of Korea (BOK) has hit the brakes on its wholesale CBDC and tokenized deposit project, known as Project Han River. This decision emerged after several participating banks raised concerns regarding the inflated infrastructure costs and the unclear prospects for commercialization. The second phase of trials, initially set for late next year, has effectively been suspended, leaving banks to rethink their roles in this evolving landscape.
Seven major banks, including KB Kookmin and Shinhan, took part in the first phase which concluded in June 2025, involving an impressive 100,000 participants testing payments at popular merchants like 7-Eleven. Despite the ambition of the project, one senior banking official remarked,
“The BOK is awaiting government instruction, particularly as stablecoin policies are becoming popular.”
The practical reality of funding such endeavors, they pointed out, overshadowed the initial excitement.
Stablecoin Strategy Takes Center Stage
With the suspension of the CBDC development, a consortium of eight banks is now gearing up to launch a won-backed stablecoin by late 2025 or early 2026, targeting streamlined administration of subsidy payments. Stablecoins have emerged as a viable alternative, favored for their lower transaction costs and greater financial transparency compared to traditional CBDCs. BOK Governor Rhee Chang-yong expressed optimism about this new focus, stating,
“Considering the scale of the project, at 110 trillion won, I believe this will be attractive for banks.”
Recent data suggests this pivot might come at the right time; the trading volume of stablecoins surged to 57 trillion KRW in the first quarter of 2025, indicating a market ready for innovation. The government’s move aligns with prevailing global sentiments where digital currencies are gaining traction as efficient financial instruments capable of reshaping fiscal policies.
Legislative and Government Backing
The South Korean government is laying the groundwork for stablecoin usage through the advancement of the Digital Asset Basic Act, which would allow companies to issue stablecoins with a minimum equity capital of 500 million KRW (approximately $370,000 USD). However, a rift has emerged in legislative circles regarding the issuance rights of stablecoins. Conservatives push for restrictions limiting issuance to banks, while progressive factions argue for broader eligibility for tech firms to innovate within the space.
Governor Rhee has engaged in discussions with the Ministry of Strategy and Finance regarding these impending legislative changes, aiming to ensure that
“the BOK’s views will be well-reflected”
in the final regulations. The outcome of these discussions will play a critical role in shaping the future of both stablecoins and CBDCs in South Korea.
Broader Implications and Next Steps
This pivot towards stablecoins could catalyze a broader integration of digital currencies into both domestic payments and international transactions, potentially influencing how different nations approach their digital currency frameworks. Despite the CBDC pause, Governor Rhee emphasized that the BOK intends to accelerate the Han River Project once new regulations surrounding cryptocurrencies and stablecoins are established.
Further enhancing the value proposition, Rhee remarked that utilizing digital fiat for subsidy disbursement would lead to improved management and transparency in fiscal operations, supported by the Ministry of Strategy and Finance. As South Korea stands at the forefront of digital currency innovation, its approach could serve as a model for other nations navigating similar terrains.
The Future Is Digital
The Bank of Korea’s strategic pivot underscores a crucial turning point in the evolution of digital currencies in South Korea. As the government and financial institutions advance their plans for stablecoins, it raises pressing questions about sustainability, efficiency, and the future of monetary policy amidst changing technological landscapes. As the world watches South Korea’s next steps, industry stakeholders are left to ponder: will stablecoins pave the way forward, or is this merely a detour on the road towards a fully realized CBDC?
