Eight major commercial banks in South Korea KB Kookmin, Shinhan, Woori, Nonghyup, Industrial Bank of Korea, Suhyup, Citibank Korea and SC First Bank have declared their intentions to collaboratively form a corporation aimed at issuing a won-pinned stablecoin. This joint project is under development in collaboration with both the Open Blockchain and DID Association and the Financial Supervisory Service.
The initiative will be the first for domestic banks to unite and enter the digital asset market in a consortium format. Negotiations on the common infrastructure and structure of operations continue. With appropriate legal and regulatory modifications, the joint venture should be developed by the end of 2025 or early 2026.
Competing with Dollar-Backed Coins and Private Sector Innovations
This step is undertaken amid the emergence of stablecoins issued by the private sector in other countries including the US and Japan. The involved banks are aiming to avoid overdependence on foreign digital currencies by launching a stablecoin pegged to Korean won.
The joint corporation will consider two issuance models: the trust-based model, in which customer money is segregated prior to the issuance of coins, and the deposit token model, in which digital tokens represent a liability to the bank 1:1 with a customer deposit. Both methods are legally and technically under consideration. The initiative complies with the Basic Digital Asset Act proposed by offering regulation of stablecoin.
Potential Use Cases and Institutional Considerations
The won-based stablecoin is not part of the central bank digital currency (CBDC) project currently run by the Bank of Korea. Still, it has the potential to connect with the national infrastructure in the future. The digital currency launched by the consortium was able to be used in both local payments, foreign remittances and web3 financial services.
Although such a broad scope was encouraging, certain authorization processes and consumer protection guidelines are still in development. Regulatory clarity and the trust of the people who will use the new financial product are crucial to the project’s success.
