South Korea's central bank abruptly halted its retail central bank digital currency (CBDC) pilot, while the nation's largest commercial banks accelerate their entry into Korean won-pegged stablecoins. The move is a sudden shift in the nation's digital finance direction and begins a new chapter in the international stablecoin-CBDC war. Political Winds and Industry Pushback The Bank of Korea (BOK) told participating banks that it was putting on hold the second stage of its ”Hangang Project” CBDC test, which had already been testing out digital won payments among 100,000 citizens and seven large banks with local merchants. This pause comes just three months into the pilot and follows growing pressure from the financial sector as well as from newly inaugurated President Lee Jae-myung, who has made stablecoin legalization a top policy priority. Banks have grumbled in greater numbers about the CBDC pilot, mentioning expenses—each of them had as much as $4.4 million invested in infrastructure and marketing—and no discernible commercialization plan. ”The second experiment of Han River Project is on the verge of collapse,” a senior banking official told Yonhap, highlighting the cost and uncertainty of participating. Banks Act Quickly as Policy Changes As the CBDC initiative stumbles, South Korea's top lenders are racing to introduce their own KRW-backed stablecoins. The country's biggest, KB Kookmin Bank, has already submitted multiple stablecoin-related trademark applications, with Shinhan Bank and others joining forces with a joint venture to issue regulated tokens. These banks are leveraging their large branch networks and customer bases to make stablecoins the next phase of digital payments, with a focus on lower fees, faster settlement, and greater traceability. The shift is being driven by regulatory and political push. President Lee's administration is backing a Digital Asset Basic Act that would create a licensing framework for stablecoin issuers with as little as ₩500 million ($370,000) of equity capital. Legislators assert local stablecoins are necessary in order to preserve monetary sovereignty and stem reliance on U.S. dollar-pegged tokens that dominate Korean crypto markets. Regulatory Hurdles The BOK action also undermines pending issues of coexistence of CBDCs, stablecoins, and bank deposit tokens in one financial system. Banks have requested regulatory guidance and an unambiguous path to commercialization prior to investing further in CBDC infrastructure. The central bank has now shifted its focus to monitoring stablecoin legislation and restructuring its internal units. In parallel, the push for stablecoins comes with risk. Legislators and regulators are seeking to strike a balance between innovation and financial safety, consumer protection, and anti-money laundering measures. The new licensing framework will demand strong reserve management and user protections, but uncertain is how these tokens will play with legacy payment systems and cross-border flows. What It Means for the Stablecoin vs. CBDC Debate South Korea's freeze is watched closely by other G20 economies, some of which already weigh the strengths of state-backed digital currencies versus private stablecoins. The Korean precedent suggests at least in the short term, market-driven stablecoins may have the edge—especially when backed by robust political support and business acceptance. The BOK will reconsider its CBDC plans in 2026, but for now the trend is with the banks and their KRW-pegged tokens. With the Digital Asset Basic Act moving forward and stablecoin pilots launching, South Korea could provide a template for how top economies navigate at the contentious juncture of monetary policy, technology, and private innovation. Bottom Line South Korea's decision to put its CBDC pilot on hold and concentrate on establishing stablecoins is a policy change in digital currencies. While regulators and banks race to define the future of money, the world waits anxiously to see if stablecoins will overtake CBDCs in the next era of global finance.
