South Korea's Banks Unite: Won-Pegged Stablecoin to Challenge the Dollar

The launch of a won-pegged stablecoin is part of an effort by eight of South Korea's largest commercial banks to strengthen the domestic financial sector and reduce dependence on digital assets that are dollar-based. The Open Blockchain and DID Association, the Financial Settlement Institute, KB Kookmin, Shinhan, and Woori banks are all part of this collaborative effort. The main incentive to pursue this strategy is a common concern that foreign-issued stablecoins, particularly those linked to the U.S. dollar, could take over the local market without introducing underlying domestic options.

Two issuance models for the stablecoin are being evaluated by the consortium: a trust-based approach where customer funds are separately entrusted, and binning an alternative deposit-linked model where stable coins are issued on deposited funds. The stablecoin's complete backing from the Korean won is guaranteed by both models. It is projected to open in late 2025 or early 2026, subject to regulatory approvals.' This initiative aligns with the Financial Services Commission's new plan for stablecoin and crypto ETF trading, while the National Assembly is currently examining legislation to create a stable co-option system for all volatile assets.

To maintain market stability and protect its users, the Bank of Korea advocates for a gradual implementation, initially through heavily regulated banks, while also being mindful of potential impacts on capital flows and monetary policy. Both regulatory encouragement and private sector urgency have led to this venture being taken a step further into the digital asset space by South Korea's commercial banks. ". By pegging the currency, it is projected that its won-pegged stablecoin will allow for more domestic payments, cross-border remittances and help to expand digital assets in Korea while also safeguarding national financial sovereignty in the digital age. ".