South Korea’s Banking Giants Team Up For Won-Backed Stablecoin Project

South Korea’s banking heavyweights are making a bold play for digital dominance, teaming up to launch a won-backed stablecoin. According to recent reports, eight major South Korean banks are collaborating with the Open Blockchain and DID Association and the Financial Settlement Institute on the stablecoin project.

South Korean Bank Consortium to Launch Won-Linked Stablecoin

As stablecoins gain momentum in the global crypto industry, eight banking giants of South Korea have joined hands to establish a won-pegged stablecoin, as per local reports. With plans to launch two models—trust-based and deposit-linked—this project represents the banking industry’s first foray into digital assets through a consortium.

“A Korean won-backed stablecoin can fill a niche as an alternative to traditional payment methods like bank wiring or currency exchange,” said Kaia DLT Foundation Chairman Sam Seo.

It is noteworthy that the move comes weeks after South Korea’s decision for a crypto regulatory overhaul under newly elected President Lee Jae-myung. As CoinGape reported earlier this month, Democratic Party proposed the Digital Asset Basic Act, with plans to legalize stable tokens.

Significantly, the latest initiative aims to challenge the dominance of dollar-based coins in the global financial market and maintain leadership in the digital asset space. Commenting on the initiative, 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.

Central Bank Calls for Cautious Approach

Notably, the South Korean banking giants’ move comes on the heels of the central bank’s cautious stance on stable tokens. Reportedly, the Bank of Korea is advocating for a phased introduction of won-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 actions. For instance, the country introduced AML rule amendments to tackle the growing crypto crimes in South Korea.

Senior Deputy Governor Ryoo Sang-dai recommends a gradual rollout of won-pegged tokens, beginning with tightly regulated commercial banks. He cited, “It is desirable to first allow banks, which are under a high level of regulations, to issue (won-based stablecoins) and gradually expand to the non-bank sector with the experience.”

The central bank’s primary goal is to ensure that the introduction of stable tokens doesn’t disrupt monetary policy or financial stability. The Bank of Korea’s proposal involves a thorough assessment of its designs and risks. It aims to draw historical lessons to build a robust framework that mitigates potential threats to financial stability. This cautious approach aligns with the global trend of central banks carefully exploring stablecoins’ potential.