Bank of Korea's new chief vows to push CBDC, deposit tokens; leaves out stablecoins

The Bank of Korea's new governor has vowed to support innovation in blockchain-based finance in his first speech after taking office.

Shin Hyun-song, a former head of the Monetary and Economic Department at the Bank for International Settlements (BIS), started his four-year term with an inauguration speech on Tuesday at the Bank of Korea headquarters in Seoul.

During the speech, Shin highlighted the central bank's commitment to stabilizing prices amid supply shocks from the Middle East, while pledging to play an active role in the structural reform of the national economy.

Notably, Shin said the central bank will protect the stability of settlement and payment systems and promote the global use of the national currency in a digitalized financial ecosystem. 

In preparation for future monetary systems, Shin said the Bank of Korea will expand the use of central bank digital currency (CBDC) and deposit tokens through the second phase of Project Hangang. The central bank will also cooperate with global initiatives, such as Project Agora, to strengthen the Korean won's position in the global payment system.

No mention of stablecoins

However, the new central bank governor omitted Korean won-pegged stablecoins from his speech, even though they have become integral to South Korea's digital transformation.

Under the endorsement of President Lee Jae-myung, South Korean legislators have been working to establish a legal framework for local stablecoins as part of the Digital Asset Basic Act, a comprehensive set of rules for digital assets.

Major local financial players have been expanding their businesses to cover stablecoins and digital asset-based payments, in anticipation of the upcoming law. The bill, however, has been notably delayed, with discussions expected to resume after the June 3 regional elections.

Last June, the Bank of Korea had reportedly paused its CBDC project as won-based stablecoins started gaining momentum.

The South Korean central bank now appears set to refocus on CBDCs and deposit tokens under the new governor.

During his tenure at BIS, Shin published a report arguing that stablecoins cannot replace currencies, citing fragmentation across different stablecoins. Nonetheless, Shin has reportedly shifted his stance, saying that won-based stablecoins should be established and co-exist with CBDCs.