A New Era in East Asian Finance: Won-Pegged Stablecoin Initiative by South Korea’s Top Banks

Key Takeaways：

• Eight Major Banks to Launch a won-pegged stablecoin by late 2025, marking the first consortium of traditional banks issuing digital currency.
• Strategic Sovereignty Bid aims to counter the dominance of U.S. dollar–backed stablecoins and reduce reliance on the greenback.
• Phased Rollout Supported by the Bank of Korea, with commercial banks leading issuance before any wider expansion.
• Regional Powerplay Intensifies as Asia’s major economies accelerate digital-currency strategies to capture cross-border transaction flows.
• Implications for the Digital Yen and Japan’s monetary sovereignty underscore the urgency for Tokyo to fast-track its CBDC research and regulatory framework.

1. Shockwaves Through Korea’s Financial Establishment

Consortium Formation and Objectives

In a landmark move, eight of South Korea’s largest banks—KB Kookmin, Shinhan, Woori, NongHyup, Industrial Bank of Korea, Suhyup, Citibank Korea, and SC First Bank—have announced plans to jointly issue a stablecoin pegged 1:1 to the Korean won by late 2025 or early 2026. This initiative, coordinated by the Korea Financial Telecommunications and Clearings Institute and supported by blockchain nonprofit Open Blockchain and the Decentralized Identity Association, represents the first time traditional banking giants in any major economy have united to issue a digital asset tied directly to their national currency.

The stablecoin project has three primary objectives:

1. Enhance Payment Efficiency by enabling near-instantaneous, low-cost transactions both domestically and cross-border.
2. Protect Financial Sovereignty by offering a home-grown alternative to the US dollar–pegged stablecoins that now account for over 99% of stablecoin market capitalization, currently over $239 billion globally.
3. Foster Innovation by laying the groundwork for new DeFi services, tokenized asset offerings, and programmable-money applications under a regulated, bank-backed trust model.

Regulatory Context and Pilot Testing

The consortium’s formation follows the recent proposal of South Korea’s Digital Asset Basic Act—legislation designed to clarify the legal status of stablecoins and establish prudential requirements for issuers. Concurrently, Bank of Korea Deputy Governor Ryoo Sang-dai has publicly endorsed a gradual introduction of won-pegged stablecoins, urging that only highly regulated commercial banks serve as initial issuers to safeguard monetary stability. This phased approach aligns with BOK’s ongoing CBDC pilot in collaboration with the Bank for International Settlements, signaling close coordination between public and private sector actors.

2. The Contest for Asia’s Financial Hegemony

Stablecoins as Geopolitical Tools

Asia’s financial landscape is undergoing rapid transformation as major economies race to digitize currencies and capture the vast flows of regional commerce. South Korea’s bank-led stablecoin is poised to challenge both China’s digital yuan and the U.S. dollar’s entrenched position in Asia’s remittance and trade networks.

• Digital Yuan vs. Won Stablecoin: China’s e-CNY has already seen rollout pilots, notably in Guangzhou and Suzhou, focusing on domestic retail payments and cross-border trials with Hong Kong. South Korea’s stablecoin, by contrast, is bank-driven and designed for interoperability with existing financial infrastructure, potentially offering wider institutional trust for global banks and corporates.
• U.S. Dollar Stablecoin Dominance: U.S. dollar–pegged tokens like USDT (Tether) and USDC collectively account for nearly $237 billion of the $239 billion stablecoin market. The reliance on dollar-based tokens exposes users to dollar-monetary policy and sanctions risk; the won-stablecoin offers a “local safe haven” alternative.

Regional Spill-Over Effects

If South Korea’s stablecoin gains traction, its impact could ripple across East and Southeast Asia:

• Cross-Border Trade: Faster settlement and lower fees may boost intra-Asian trade corridors—particularly between Korea, Japan, and ASEAN countries—challenging correspondent-bank networks.
• Financial Inclusion: By leveraging mobile banking apps of leading Korean banks, the stablecoin could onboard underbanked populations in neighboring markets.
• Competitive Response: Japan, Singapore, and Thailand may accelerate their own digital currency or stablecoin frameworks to avoid losing transactional volume to Seoul-based rails.

This intensifying competition underscores why the Bank of Korea advocates for a carefully controlled rollout: to manage systemic risk while capturing first-mover advantages in Asia’s next-generation financial ecosystem.

3. The Urgent Question for Japan’s Yen

Current State of Digital Yen Research

While South Korea embarks on a bank-led stablecoin, Japan’s approach remains cautious but evolving. The Bank of Japan (BOJ) has conducted multiple proof-of-concept and pilot phases since 2021, focusing on technical feasibility, privacy, and interoperability. Recent BOJ releases highlight:

• Pilot Program Status: As of June 2025, BOJ Director Kazunari Kamiyama confirmed no immediate plans to issue a digital yen but emphasized ongoing pilot tests and private-sector collaboration under “Project Agorá,” a BIS-led initiative for cross-border CBDC trials.
• Cashless Drive: Japan’s cashless payment ratio rose to 42.8% in 2024 (up from 13.2% in 2010), surpassing government targets ahead of schedule. BOJ Executive Director Shinichi Uchida warned that failure to innovate could erode the yen’s global standing as digital alternatives emerge.

Strategic Imperatives

Given the shifting landscape, Japan faces three strategic imperatives:

1. Accelerate Regulatory Clarity: Enact a “Digital Yen Framework Act” to define issuer roles, consumer protections, and AML/KYC standards for a potential retail CBDC or bank-issued stablecoins.
2. Strengthen Infrastructure: Upgrade domestic RTGS and wholesale payment systems (BOJ’s BOJ-NET) for real-time settlement and 24/7 liquidity management.
3. Foster Public-Private Partnerships: Leverage the existing Liaison and Coordination Committee on CBDC to pilot tokenization platforms alongside major banks, fintech firms, and technology providers.

By adopting a more proactive stance—mirroring Seoul’s bank consortium—Tokyo can ensure the yen remains competitive in regional trade, remittances, and digital finance markets.

Exchange Rate Snapshot (₩ to USD)

Implied: 1 USD ≈ ₩1,364.65

Conclusion: Navigating the Digital Currency Frontier

South Korea’s eight-bank stablecoin initiative marks a pivotal moment in the evolution of digital finance, blending traditional banking integrity with the innovation of blockchain. As Asia’s digital-currency contest intensifies, Seoul’s move to reinforce financial sovereignty through a won-pegged token will test the agility of incumbents and the readiness of regulators.

For Japan, the message is unequivocal: the digital transformation of money waits for no one. To safeguard the yen’s status and meet the rising demand for efficient, secure, and compliant digital payments, Japan must translate cautious research into concrete action—through legislation, infrastructure upgrades, and collaborative experimentation.

The outcome of this race will reshape not only payment rails and trade settlements but also the broader architecture of monetary sovereignty in the 21st century.