South Korea’s largest banks will launch a won-based stablecoin

What’s new? Eight of South Korea’s largest commercial banks will set up a joint venture to launch a stablecoin based on the won. The initiative aims to combat the growing dominance of dollar-pegged stablecoins in the global financial market and strengthen the country’s position in the crypto market.

Material by Econovill

What else is known? KB Kookmin, Shinhan, Woori, Nonghyup, Industrial Bank of Korea, Suhyup, Citibank Korea, and SC First Bank are participating in the project and will be assisted by the Financial Supervisory Service of the Financial Services Commission (FSC) and crypto firm Open Blockchain and DID Association. This is actually the first time that banks are entering the digital asset market in the form of a consortium.

The move underscores that Korea, following the example of the US and Japan, is looking to expand its influence in the global payments and remittance market through the use of national currency-based coins.

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Discussions are underway to establish a joint infrastructure between banks. The establishment of a corporation could be possible by the end of 2025 or early 2026 after the reorganization of the legal system.

Coins can be issued in one of two ways: the trust model (coins are issued after a separate investment of customer funds) and the deposit token model (coins are issued by linking them to bank deposits at a 1:1 ratio). So far, banks have not yet decided on an option.

This trend is also intertwined with the “Digital Asset Basic Act” by the National Assembly. The bill explicitly mentions the introduction of an authorization system for stablecoins. In turn, the FSC has presented a roadmap for the institutionalization of virtual assets, including stablecoins.

One employee of a participating bank stated:

“There is a shared sense of crisis that if things continue this way, foreign dollar coins could dominate the domestic market. It is time to secure both the independence and competitiveness of the domestic financial system through a won-based digital currency.”

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The private bank joint venture will be an initiative separate from the CBDC being developed by the Bank of Korea. The parties now need to hold further discussions on whether technological and operational links will be established with the central bank.