Eight South Korean banking companies are joining hands to launch a winning pegged stablecoin, but the central bank advises a cautious stance.

South Korean banking heavyweights are making a bold play for digital dominance, teaming up to launch a winning stablecoin.

According to recent reports, eight major banks in South Korea are collaborating on a stablecoin project with the Open Blockchain and DID Association and the Financial Settlement Institute.

South Korean Bank Consortium to Launch Won-Linked Stablecoin

As stablecoins gain momentum in the global crypto industry, eight South Korean banking institutions have joined hands to establish a winning stablecoin, according to local reports.

With plans to launch two models – trust-based and deposit-linked – the project represents the banking industry's first foray into digital assets by the consortium.

"The Korean winning stablecoin could fill a niche as an alternative to traditional payment methods such as bank wiring or currency exchange," said Sam Seo, chairman of the Kaia DLT Foundation.

Notably, the move comes weeks after South Korea’s newly elected president Lee Jae-myung announced a crypto regulatory overhaul.

The Democratic Party has proposed the Digital Asset Fundamentals Act, with plans to legalize stablecoins.

Importantly, the latest move aims to challenge the dominance of dollar-based coins in global financial markets and maintain leadership in digital assets. Commenting on the move, a bank spokesperson noted,

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


The central bank calls for a cautious approach.

Notably, this move by South Korean banking institutions is in line with the central bank's cautious stance on stablecoins.

The Bank of Korea is reportedly advocating for a phased introduction of one-pegged assets.

Interestingly, South Korea's foray into the stablecoin space is part of its broader efforts to strengthen its position in the global crypto market, driven by various initiatives and regulatory measures.

For example, the country introduced amendments to the AML rule to combat the growing crypto crime in South Korea.

Senior Deputy Governor Ryo Sang-dae has recommended a gradual rollout of one-pegged tokens, starting with strictly regulated commercial banks. "

It is important to first allow banks, which are subject to a high level of regulation, to issue (one-based stablecoins) and gradually expand to the non-bank sector with experience," he quoted.

The central bank's primary objective is to ensure that the introduction of stablecoins does not disrupt monetary policy or financial stability.

The Bank of Korea’s proposal involves a thorough review of its design and risks. It aims to draw on historical lessons to build a strong framework that mitigates potential risks to financial stability.

This cautious approach is consistent with a global trend of central banks carefully exploring the potential of stablecoins.

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