South Korea Postpones CBDC Testing Amid Growing Stablecoin Momentum

South Korea's central bank, the Bank of Korea (BOK), has reportedly postponed the second phase of its central bank digital currency (CBDC) testing, which was initially slated for later this year. Local news outlets Yonhap News Agency and The Chosun Daily reported on Monday that the BOK informed participating banks of the temporary suspension.

A senior official from one of the seven banks involved in the trials indicated that the central bank is awaiting clarity on the government's stablecoin plans and how a CBDC would integrate with such tokens. This comes as newly elected President Lee Jae-myung has campaigned on crypto-related promises, including supporting the issuance of stablecoins. His party recently proposed a bill that would permit companies to issue won-backed stablecoins with a minimum equity capital of 500 million Korean won ($370,000).

The decision also follows reported dissatisfaction from participating banks over the cost of the CBDC trials and the absence of a clear commercialization plan from the BOK. One senior banking official suggested the second phase of the trials was "on the verge of collapse" due to these cost concerns. The BOK is reportedly considering moving the second half of the tests to the first half of next year and potentially limiting the number of financial institutions involved.

The first stage of the CBDC tests, which involved 100,000 participants testing payments, concluded on June 30. This postponement occurs as South Korean banks are reportedly keen on issuing their own stablecoins, with eight major banks reportedly planning to launch a won-backed stablecoin by next year, a group that includes half of the banks involved in the initial CBDC trials.