The new governor of South Korea’s central bank, Shin Hyun-song, began his four-year term by outlining his four priorities, one of which was promoting and supporting central bank digital currencies (CBDCs) and tokenized deposits, as part of an effort to internationalize the won and innovate the currency regime.
According to a report from local outlet Chosun Biz, whichpublished the new Bank of Korea (BoK) governor’s inaugural speech, Shin opened his address by stating that “in this time of transition, we must again ask what the role of the Central Bank is.”
To answer this, he outlined his four main priorities for the BoK: seeking price and financial stability through currency policy management, playing an active role in the economy’s structural reform, and backing CBDCs and deposit tokens.
CBDC and tokenized deposits
Specifically, Shin outlined how, in a globalized and digitalized financial environment, “safeguarding trust in money and the stability of payments and settlements is also the Central Bank’s mission of the era.”
This means progressing the design of South Korea’s future currency regime in response to digital financial innovation, as well as internationalizing the won “to establish a currency infrastructure befitting our economy’s status.”
To achieve this, the BoK governor said that: “Through Phase two of Project Han River, we will increase the usability of CBDC and deposit tokens, and through international cooperation such as the Agorá Project, we will enhance the won’s standing even in a digital payments environment.”
Project Agorá is an international public-private partnership between central banks and a large group of regulated private sector firms, exploring tokenized versions of commercial bank money and wholesale central bank money.
Meanwhile, Project Han River is a South Korean initiative aimed at establishing the institutional and technical framework for the formal adoption of a CBDC system and the commercialization of deposit tokens. Phase one of the project saw a real-world pilot conducted with over 81,000 participants and nearly 115,000 transactions.
Phase two of the project was launched in March and will involve the BoK conducting a comprehensive review of the institutional and legal reforms required for a full-scale national rollout. It also marked an expansion in scale, with two additional institutions—Kyongnam Bank and iM Bank—joining the original seven participating lenders (Kookmin, Shinhan, Woori, Hana, IBK, Nonghyup, and Busan), bringing the total to nine.
Norbert Gehrke, founder of the Tokyo FinTech Association, said a key objective for these participants is reducing transaction fees, as the BoK aims to provide a lower-cost payment alternative for both large-scale franchises and small business owners by using deposit tokens.
“As these efforts to internationalize the won and innovate the currency regime must not undermine financial stability and therefore require safeguards, we will discuss a macroprudential framework suited to the changed environment,” said Shin, in his address on Tuesday. “In this way, we will work with the government so that internationalization of the won, innovation in payments and settlements, and the macroprudential framework form a ‘triangular axis’ that can generate synergy.”
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What was not said and what it means
Fostering and supporting digitization and tokenization appear to be top priorities for the BoK going forward, yet it was telling that the new governor made no mention of stablecoins, instead limiting his comments to CBDCs and deposit tokens.
This may suggest that South Korea’s central bank is heading in the same direction as the European Union in the CBDC vs. stablecoin debate. While the two sub-categories of digital assets are not necessarily mutually exclusive, there does appear to be a growing divide over which of the two countries is backing them.
On the one hand, you have the United States under President Donald Trump, who kicked off his second term last January by signing an executive order “prohibiting the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States.”
Trump is a long-time critic of CBDCs, citing concerns around the stability of the financial system, state surveillance, and individual privacy. In contrast, the U.S. president is a vocal supporter of the stablecoin space and enthusiastically waved through legislation last year aimed at providing clarity to stablecoins in the U.S. in the form of the GENIUS Act.
On this increasingly “either-or” choice, the EU stands as the yin to Trump’s yang—as it does for many other issues—as the European Commission and European Central Bank (ECB) have both thrown their weight behind a digital euro CBDC. Their arguments often refer to the growing dominance of USD-denominated stablecoins and to fears of digital dollarization, or “stablecoinization.”
However, the ECB has also made clear that it would support Euro-denominated stablecoins issued in the EU.
Comparing the two contrasting approaches to CBDCs exemplified by the U.S. and EU, it appears the BoK is leaning towards the latter.
With that in mind, it’s hard not to see Shin’s comments, that “internationalizing the won is an important task to establish a currency infrastructure befitting our economy’s status,” as part of a growing fightback against the oversized influence of the U.S. dollar, boosted by a booming stablecoin space that is 98% U.S. dollar-pegged.
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Source: https://coingeek.com/new-bank-of-korea-head-prioritizes-cbdcs-deposit-tokens/
