Eight major South Korean banks have partnered with the Open Blockchain and DID Association and the Financial Settlement Institute to develop a Korean won-backed stablecoin. This joint venture marks the first time the nation’s banking sector has collectively stepped into the digital asset space, aiming to reshape South Korea’s financial landscape.
A Historic Collaboration Takes Shape
The journey began when banks like KB Kookmin and Shinhan, giants in South Korea’s financial sector, recognized the growing influence of digital currencies. Unlike past crypto projects led by tech firms, this is the first time banks have formed a consortium to issue a stablecoin, signaling a shift in traditional finance. The trust-based model involves issuing coins backed by entrusted customer funds, while the deposit-linked model ties coins directly to bank deposits, ensuring a 1:1 peg with the South Korean won.
This banking-led approach aims to build trust and stability, distinguishing it from the volatility of virtual assets. The Open Blockchain and DID Association will provide the technology to facilitate the stablecoin creation. The Financial Settlement Institute ensures secure transactions. Discussions on infrastructure are ongoing, with the venture potentially launching by late 2025 or early 2026, pending regulatory approval.
South Korea’s Crypto Landscape
South Korea is a crypto hotspot, with high trading volumes on exchanges such as Upbit and Bithumb. The government, under President Lee Jae-myung, is pushing for won-based stablecoins to reduce reliance on U.S. dollar-based stablecoins, which could curb capital outflows. New laws, such as the Digital Asset Basic Act, set strict standards, requiring issuers to hold at least $500 million in capital and maintain secure reserves.
The consortium, however, awaits the passage of South Korea’s Digital Asset Basic Act, proposed by Rep. Min Byung-deok, to finalize regulations. If passed by July 2025, the joint venture could establish a legal entity to issue the stablecoin, potentially transforming payments and remittances while strengthening the won’s role in global finance.
Meanwhile, collaboration by financial institutions for stablecoin adoption is gradually becoming a trend. For instance, major banks in the United States are also uniting to venture into digital assets, creating a stablecoin pegged to the U.S. dollar that rivals digital asset platforms. Initial discussions suggest a model that would allow other banks to utilize the stablecoin, thereby expanding its reach.
