- Bank of Korea is actively promoting its central bank digital currency (CBDC) efforts to Korea’s top banks.
- Korea’s largest banks recently announced a joint private stablecoin project amid these CBDC initiatives.
- The central bank is supporting tokenized deposit and wholesale CBDC pilot projects with financial incentives for participants.
- Authorities are considering allowing deposit tokens on public blockchains to coexist with private stablecoins.
- Korea’s moves could serve as a template as central banks worldwide address the private-public digital currency competition.
The Bank of Korea (BOK) is urging the country’s largest banks to back its digital currency projects, following the banks’ announcement of a joint plan to launch a stablecoin. This development puts South Korea at the center of efforts to determine who will control the future of digital payments: national regulators or private banking groups.
According to the Korea Times, BOK Governor Rhee Chang-yong visited the country’s six biggest banks in person last week. The meetings focused on wholesale central bank digital currency (wCBDC) pilots and projects for tokenized deposits. The BOK offered to cover one-third of the costs for Project Hangang, its domestic tokenized deposit initiative.
Governor Rhee reportedly spent around 30 minutes in individual meetings with each bank head at KB Kookmin, Shinhan, Hana, Woori, NH NongHyup, and Industrial Bank of Korea. The talks centered on the BOK’s wCBDC projects, as five out of six banks planned a joint stablecoin just weeks after joining the Hangang pilot. There was also a broader meeting at the central bank that included global leaders like Timothy Adams of the Institute of International Finance (IIF), which coordinates the cross-border Project Agorá for wholesale CBDC.
The wCBDC initiatives address institutional payments, including cross-border transactions and domestic consumer payments through tokenized deposits. The BOK’s involvement in Project Agorá and Project Hangang includes over 40 financial institutions and up to 100,000 users in trials, according to project details.
Stablecoins are digital currencies typically “fully backed,” meaning they keep reserves equal to the issued amount—a model called “narrow banking.” This differs from traditional banking, which uses fractional reserves and lends out deposits. The central bank noted concerns that private stablecoins could weaken its control over monetary policy, as many are not supervised by central authorities. In contrast, most tokenized deposits are on “permissioned” blockchains that require authorization, offering more oversight than “permissionless” stablecoins.
Despite previous caution about stablecoins, a report from Korea’s News1 cited BOK Deputy Governor Lee Jong-ryeol as saying the central bank is now considering letting deposit tokens operate on public blockchains. “We are considering a direction in which it (deposit tokens) will coexist within the entire digital currency system in conjunction with stablecoins issued by the private sector,” Lee said.
Project Hangang already allows various tokenized deposit models, including some fully backed by wCBDC for third-party platforms. The country is also drafting new stablecoin laws, with the BOK seeking a leading role in regulation.
Korea’s fast-moving digital currency efforts may guide how other countries balance private innovation and central control over digital payments. The BOK’s active approach, including direct engagement with banks and possible new rules for blockchain tokens, highlights the pressure global central banks face in a changing financial system.
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