Eight major commercial South Korean banks have formed a consortium to establish a won-linked stablecoin venture. The collaboration involves participation from the Open Blockchain and DID Association, and the Financial Supervisory Service.
Announced on Wednesday by the country’s financial sector, the joint venture marks the first time commercial banks have entered into the digital asset business in the form of a consortium.
The group of eight banks includes KB Kookmin, Shinhan, Woori, Nonghyup, Industrial Bank of Korea, Suhyup, Citibank Korea, and SC First Bank.
The announcement arrives in line with the central bank’s advocacy for a phased rollout of a won-backed stablecoin.
The Bank of Korea’s (BOK) senior deputy governor Ryoo Sang-dai said Tuesday at a press conference that it was desirable to initially allow commercial banks to introduce won-denominated stablecoins at a gradual pace.
Commercial banks’ involvement in stablecoin is a signal that the private sector is starting to respond to crypto in earnest. Particularly, when the US has established its first federal framework for dollar-pegged stablecoins – the GENIUS Act, several nations like South Korea and industry giants like Amazon are moving toward embracing this asset class.
Banks Rollout Two Initial Won-Linked Stablecoin Models
Per the local report, discussions on joint infrastructure between banks are currently in progress. Further, the establishment of the cooperation would come to light this year or early next year.
The banks have rolled out an initial plan comprising two methods of issuing the won-backed stablecoin – trust-based and deposit-linked.
In the trust model, coins are issued after separately entrusting customer funds, while in the deposit-linked model, coins are issued by linking 1:1 with bank deposits.
“There is a shared sense of crisis that if things continue this way, foreign dollar coins could dominate the domestic market,” a banking official noted. “It is time to secure both the independence and competitiveness of the domestic financial system through a won-based digital currency.”
Stablecoin Regulations and President’s Promises
The current trend of banks’ involvement is in line with the Digital Asset Act that was recently proposed by South Korea’s National Assembly. The legislation explicitly notes the introduction of a stablecoin authorization system.
However, the Bank of Korea is still skeptical of proposals to launch a won stablecoin. Meanwhile, the newly elected President Lee Jae-myung has pledged to launch a KRW-pegged coin for use in business and international trade.
His administration is quickly moving to implement campaign pledges aimed at modernizing South Korea’s regulatory framework for digital assets.
The joint venture of banks is a private sector-led model, differing from the CBDC being prepared by the Bank of Korea. Though further discussions on its technological linkages with the central bank are needed, there are talks in the market that it can be expanded into various applications such as cross-border remittance and domestic payments.
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