South Korea has recently made the decision to pause its digital currency testing project, delaying preparations for the next phase amidst the growing relevance of stablecoins in the political and market landscape.
The Bank of Korea has informed participating banks that discussions related to the second stage of its central bank digital currency pilot will be temporarily halted. Originally scheduled to commence later this year, the pause comes as the central bank reassesses its priorities in light of current developments.
The delay coincides with the new administration led by President Lee Jae-myung, who has placed a significant focus on stablecoins. President Lee has proposed expanding the pool of issuers to include companies with as little as 500 million won in equity, allowing them to issue won-based stablecoins. This move reflects the administration’s view that stablecoins could play a pivotal role in South Korea’s digital asset strategy.
Despite the push towards stablecoins, BOK officials are proceeding with caution. Senior Deputy Governor Ryoo Sang-dai emphasized the importance of a gradual rollout led by banks, with stringent consumer protections and measures to prevent market disruptions.
South Korea continues to be a prominent player in the global crypto market, with over a third of its population, approximately 18 million individuals, engaged in digital asset trading. On high-volume days, local crypto exchanges have outperformed traditional equity markets like the Kospi and Kosdaq.
A recent survey revealed that over half of South Koreans aged 20 to 59 have dabbled in crypto trading, with one in four currently holding digital assets. For these investors, cryptocurrencies constitute at least 14% of their overall financial portfolios, with many maintaining wallets across various domestic exchanges.
The enthusiasm surrounding digital assets has spilled over into the stock market, with shares of companies associated with the Bank of Korea’s CBDC initiative experiencing significant rallies. Kakao Pay’s value has more than doubled this month, while LG CNS saw a surge of nearly 70% before a slight pullback.
As South Korea navigates the evolving landscape of digital currencies and stablecoins, the decision to pause the CBDC project underscores the need for careful consideration and strategic planning in embracing these emerging technologies. Stay tuned for further updates on this developing story.