Key Highlights
- Bank of Korea nominee Shin Hyun-song backs CBDC and deposits tokens as the foundation of South Korea’s future digital money system.
- Shin conditionally accepts a regulated won stablecoin in a complementary role but has historically questioned whether stablecoins are necessary
- Project Hangang trials expand as banks test CBDC and deposit tokens, while regulators debate stablecoin control and innovation pace.
South Korea’s financial authorities are moving toward a new digital currency framework, as Bank of Korea governor nominee Shin Hyun-song outlined a CBDC-focused approach in written responses submitted to the National Assembly Finance and Economy Committee ahead of his confirmation hearing. He said that central bank digital currency and bank-issued deposit tokens should form the core of the country’s digital money system.
He also conditionally accepted the idea of a Korean won stablecoin, but only under strict regulation. At the same time, he stressed that trust and compliance must guide any rollout. His position now signals the direction policymakers may take in reshaping the financial system.
As per a local report, in a written pre-hearing responses, Shin made these comments in a written response to the National Assembly Finance and Economy Committee. He said any digital currency system must balance innovation with financial stability. He also noted that stablecoins could be useful for tokenized assets and automated payment systems.
However, he cautioned that they cannot replace traditional money such as fiat currency. His remarks now put pressure on regulators to coordinate CBDC development with stablecoin rules and existing banking regulations.
CBDC strategy and stablecoin framework
Shin said central bank digital currencies and bank deposit tokens should work together in payments and settlement systems. He also pointed to stablecoins as tools that could expand how digital finance is used.
He stated, “Stablecoins will have a significant role in the future monetary ecosystem, given their positive effects such as serving as a means of trading tokenized assets and supporting programming functions,” and added that “they will be able to coexist with deposit tokens both complementarily and competitively.”
At the same time, he set clear limits on how far crypto assets can go in the financial system. He said virtual assets still do not fully meet the basic functions of money. He also noted they lack stability when used for pricing or payments.
Because of this, he supported a model where banks lead the issuance of won stablecoins. He said banks already follow strict financial rules, which makes them more suitable for early rollout. It is worth noting that Shin has historically been skeptical of stablecoins, stating in 2022 that “if we have the real thing (central bank money), why do we need stablecoins?” and arguing that CBDCs can perform the same functions.
He also questioned claims that blockchain could improve foreign exchange transactions. He said such systems may struggle to meet capital control requirements. He warned that compliance costs could rise and reduce any efficiency gains from digital currency use.
Project Hangang and regulatory tensions
Shin’s position matches the Bank of Korea’s ongoing Project Hangang CBDC program. The project tests how deposit tokens can work on top of wholesale CBDC infrastructure. In March, nine commercial banks moved into the second phase of trials. Kyongnam Bank and iM Bank also joined the expanded testing group.
The program focuses on real payment situations such as government subsidies and retail transfers. It also looks at whether digital payments can reduce transaction costs for users. Banks have indicated they are focusing on areas where payment fees are high, with lower costs expected to especially help small merchants who currently pay significant card fees.
Meanwhile, South Korea’s fintech sector continues to grow quickly. Lawmakers are still discussing the Digital Asset Basic Act. The proposal sets rules for issuing, storing, and trading digital assets. It also introduces requirements around licensing, reserves, and regulatory approval for issuers.
Regulators in South Korea are still split over who should issue stablecoins. The central bank wants banks to take the lead and keep tight control. However, the Financial Services Commission says strict limits could slow down new ideas in the market. As a result, policymakers now face a choice between protecting financial stability and encouraging faster innovation in digital finance.
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