Won Stablecoin: South Korean Banks’ Strategic Push for Interest-Bearing Digital Currency

In a pivotal move for the future of digital finance, South Korea’s banking sector is consolidating its position to advocate for the issuance of a won-backed stablecoin, with a critical condition: the ability to pay interest on it. According to an exclusive report by the Electronic Times on January 19, 2025, this initiative represents a strategic effort by traditional financial institutions to secure influence from the initial stages of regulatory design, as the government’s enactment of the landmark Digital Asset Basic Act approaches. This development in Seoul could fundamentally reshape the nation’s monetary landscape and set a global precedent for bank-led digital currency models.

The Won Stablecoin Proposal and Banking Consortium Strategy

Financial industry sources confirmed that the Korea Federation of Banks (KFB) held a private briefing for its members on January 15. This meeting included major commercial banks and aimed to coordinate a unified response. Discussions reportedly focused on a single, bank-centric stablecoin issuance model. Furthermore, the proposal to allow interest payments under that specific framework formed a core part of the agenda. This meeting was not an isolated event. It served as part of an interim review of a comprehensive research project on won-backed stablecoins. The KFB commissioned this project from the global management consulting firm McKinsey & Company.

The banking industry’s push is a direct response to the impending regulatory shift. The South Korean government is finalizing the Digital Asset Basic Act, which will establish a comprehensive legal framework for digital assets. Consequently, banks are acting preemptively to ensure their role is cemented within this new ecosystem. Their model contrasts with existing private stablecoins, like USDT or USDC, by emphasizing institutional control, regulatory compliance, and integration with traditional monetary policy. A bank-issued, interest-bearing won stablecoin could offer a safer, regulated alternative for consumers and businesses seeking exposure to digital assets without the volatility of cryptocurrencies like Bitcoin.

Regulatory Context and the Digital Asset Basic Act

The timing of this banking initiative is highly strategic. South Korea’s National Assembly has been working on the Digital Asset Basic Act for several years. This legislation aims to provide clear rules for cryptocurrency exchanges, token issuance, investor protection, and market oversight. The act is expected to pass in 2025, creating a new era of legal certainty for the digital asset industry. The banks’ proposal directly engages with this legislative process, seeking to shape the provisions governing stablecoins before they are finalized.

Globally, regulators are grappling with how to manage stablecoins. For instance, the European Union’s Markets in Crypto-Assets (MiCA) regulation imposes strict requirements on stablecoin issuers. Similarly, the United States has seen multiple legislative proposals but no unified federal law. South Korea’s approach, potentially incorporating a bank-led model with interest-bearing features, could become a unique hybrid. It blends traditional finance’s stability with blockchain technology’s efficiency. The ability to pay interest is a particularly significant differentiator. It would allow a digital won to compete directly with traditional savings accounts and money market funds, potentially increasing its adoption and utility.

Expert Analysis on Economic Impacts and Market Dynamics

Financial analysts highlight several potential impacts of a bank-issued, interest-bearing stablecoin. First, it could enhance monetary policy transmission. The Bank of Korea could theoretically use the stablecoin’s interest rate as a more direct tool. Second, it would create a powerful new product for banks to retain deposits in a digital age. Third, it poses a direct challenge to private decentralized finance (DeFi) platforms that offer yield on crypto assets. However, experts also caution about complexities. Determining who sets the interest rate—individual banks or a collective mechanism—and how it aligns with central bank policy requires careful design. Furthermore, ensuring interoperability with other blockchain networks and existing payment systems is a major technical hurdle.

The proposal also reflects a broader trend of financial institutions reclaiming ground from fintech and crypto-native companies. By leveraging their existing trust, customer bases, and regulatory relationships, banks aim to become the primary issuers of the digital representations of national currency. This model could reduce risks associated with private stablecoin issuers, such as reserve transparency and operational failure. A comparative table illustrates the key differences between the proposed model and existing private stablecoins:

Potential Challenges and the Path Forward

Despite the strategic positioning, the banking sector’s proposal faces several challenges. Regulatory approval for interest payments is not guaranteed. Authorities must consider the implications for:

• Financial Stability: Could a widely adopted digital stablecoin impact bank deposit levels?
• Monetary Sovereignty: How does a bank-set interest rate interact with the Bank of Korea’s policy rate?
• Consumer Protection: What disclosures and guarantees are required for interest-bearing digital assets?
• Technical Implementation: Developing a secure, scalable, and interoperable blockchain infrastructure.

Moreover, other stakeholders in South Korea’s vibrant crypto industry may have competing visions. Cryptocurrency exchanges and blockchain startups might advocate for a more open, permissionless model. The final framework within the Digital Asset Basic Act will likely result from negotiation between these groups. The KFB’s private briefing and coordinated advocacy demonstrate that traditional banks are no longer passive observers. They are actively engaging to define the rules of the next financial system. The outcome will significantly influence whether South Korea’s digital asset economy is bank-centric, decentralized, or a novel blend of both.

Conclusion

The push by South Korean banks to issue an interest-bearing won stablecoin marks a critical juncture in the integration of traditional finance and digital assets. By seeking regulatory approval for this model ahead of the Digital Asset Basic Act, the banking industry is strategically positioning itself as the cornerstone of the nation’s future digital currency ecosystem. This move promises enhanced monetary utility, greater consumer protection, and a regulated alternative to private stablecoins. However, its success hinges on careful regulatory design, technical execution, and balancing the interests of various market participants. As 2025 progresses, the development of this won stablecoin proposal will be a key indicator of South Korea’s broader strategy for financial innovation and digital sovereignty.

FAQs

Q1: What is a won stablecoin?
A won stablecoin is a type of digital currency whose value is pegged 1:1 to the South Korean Won (KRW). It is issued on a blockchain and designed to maintain a stable value, unlike volatile cryptocurrencies like Bitcoin.

Q2: Why do South Korean banks want to issue a stablecoin?
Banks aim to secure a central role in the emerging digital asset economy regulated by the upcoming Digital Asset Basic Act. Issuing a stablecoin allows them to offer digital payment services, retain customer deposits in a new form, and compete with private crypto companies.

Q3: What does “interest-bearing” mean for a stablecoin?
It means the digital currency would accrue interest for holders, similar to a savings account. This feature could make it more attractive for everyday use and savings, directly competing with traditional bank deposits.

Q4: How is this different from a Central Bank Digital Currency (CBDC)?
The Bank of Korea is separately researching a CBDC, which would be a direct digital liability of the central bank. The proposed bank-issued stablecoin would be a liability of the commercial banks, similar to digital bank deposits, but built on blockchain technology.

Q5: When could this bank-issued won stablecoin launch?
There is no official launch date. Its development depends on the passage and final provisions of the Digital Asset Basic Act, followed by regulatory approval for the specific interest-bearing model proposed by the banks. A pilot could potentially begin in late 2025 or 2026.