South Korea’s central bank has reportedly postponed the testing of a central bank digital currency (CBDC) as the country’s government has increasingly aired support for local currency stablecoins.
On Sunday, the Bank of Korea told banks taking part in CBDC tests that started in April that it was temporarily suspending and postponing the second round of tests slated for later this year, local outlets the Yonhap News Agency and The Chosun Daily reported on Monday.
A senior official at one of the seven banks taking part in the tests told Yonhap that the central bank is waiting to see the government’s plans for stablecoins and how a CBDC would fit with such tokens.
Newly elected President Lee Jae-myung campaigned on a list of crypto promises, including allowing for the issuance of stablecoins, crypto tokens that track the price of currencies such as the Korean won.
His party put forward a bill earlier this month that would allow companies to issue such tokens with a minimum equity capital of 500 million Korean won ($370,000).
Banks unhappy with expensive CBDC project
One senior banking official said that the second part of the CBDC trials was already “on the verge of collapse” as the seven participating banks became unhappy with the cost of taking part.
The participating banks reportedly told the Bank of Korea that the trial was too expensive and were unhappy that the central bank hadn’t specified a commercialization plan for the CBDC.
The Bank of Korea floated moving the second half of the tests from later this year to the first half of next year and could limit the number of financial institutions taking part, an unnamed senior banking official told Yonhap.
The first stage of the CBDC tests involved 100,000 participants testing payments using the central-bank-issued currency, which ran from April 1 to June 30 and the second stage would expand the number of merchants and bring in remittances.
Korean banks want stablecoins
The banks reportedly wanted to focus on issuing their own stablecoins, seemingly as there is a clearer path to financially benefiting from such tokens.
On Wednesday, it was reported that eight South Korean banks would team up to launch a won-backed stablecoin by next year.
Related: 27% of Koreans aged 20–50 hold crypto, 70% eye more investments
Half of the banks that came together for the stablecoin — KB Kookmin, Shinhan, Woori and NongHyup — also took part in the first stage CBDC trials.
South Korean fintech stocks see mixed open
Shares in some South Korean fintech companies fell on Monday after news of the CBDC suspension and banks’ desire to focus on stablecoins.
Shares in the mobile payment app KakaoPay Corp were down 7% as of 2 pm local time, while payments firm Hecto Financial was down around 5%.
KB Financial Group, the parent company of KB Kookmin, saw a 0.8% bump, while Shinhan was up 1.6% so far on the day.
Legal Panel: Crypto wanted to overthrow banks, now it’s becoming them in stablecoin fight
