Eight South Korea’s Top Banks Teamed Up to Establish a Joint Won-based Stablecoin

Eight of South Korea’s major banking institutions are collectively venturing into the realm of digital assets with the ambitious launch of a South Korean won-backed stablecoin.

This pioneering effort, spearheaded by eight prominent banks in collaboration with the Open Blockchain and DID Association and the Financial Settlement Institute, marks a pivotal moment for the nation’s financial sector.

South Korean Banks Explore Stablecoin Venture

As people want more stablecoins, eight big South Korean banks have joined forces to create a stablecoin tied to their national currency. This project will have two main types: one based on trust and another linked to deposits.

Moreover, it’s the first time the banking industry is entering the digital asset world through a group effort. Sam Seo, who leads the Kaia DLT Foundation, noted that this new stablecoin could offer an alternative means of payment, similar to bank transfers or currency exchanges.

This strategic move by South Korea’s top banks comes just weeks after the country announced plans to significantly overhaul its crypto regulations, a proposal initiated by the new President, Lee Jae-myung. The Democratic Party has proposed a law called the Digital Asset Basic Act, which would legalize stable tokens.

Furthermore, this project is essential because it aims to compete with stablecoins already in the market that are tied to the U.S. dollar, helping South Korea become a leader in digital assets.

Bank of Korea (BOK) Cautious Step

However, South Korea’s central bank, the Bank of Korea, is being cautious about stablecoins. Reports indicate that the Bank of Korea aims to introduce won-pegged assets gradually to maintain stability and prevent issues.

The Bank of Korea’s Deputy Governor, Ryoo Sangdai, has suggested a careful plan for introducing stablecoins in South Korea. He believes it should happen in stages, with banks being the main issuers first. This plan, unveiled at a recent press conference, aims to establish robust safety measures and mitigate risks associated with this new type of digital currency.

“The aim is to establish a safety net, considering the potential for market disruption or consumer harm and shift the fundamental stance we have maintained on foreign exchange liberalization, and the internationalization of the Korean won,” Ryoo Sangdai explained.

However, although he proposed that banks should lead the issuance, the central bank still has some worries about stablecoins.