Eight major South Korean banks are collaborating with the Open Blockchain, DID Association, and the Financial Settlement Institute to launch a Korean won-backed stablecoin joint venture.
The move marks a historic step, as it’s the first time traditional banks in South Korea are collectively entering the digital asset space through a consortium model.
The domestic banks involved in the project include Kookmin Bank, Shinhan Bank, Woori Bank, Nonghyup Bank, Korea Development Bank, Suhyup Bank, Citibank Korea, and Standard Chartered Korea.
The move also reflects growing recognition of blockchain’s potential to modernize and streamline financial services while maintaining regulatory oversight and user trust.
Project explores two stablecoin models: trust-based and deposit-linked
The project proposes two distinct stablecoin models. The first is trust-based, in which a third-party trust institution safeguards the fiat currency backing the stablecoin.
This model aims to ensure stability and transparency by separating asset custody from the issuer, which can enhance consumer confidence.
The second model is deposit-linked, where stablecoins are directly tied to bank deposits. In this system, stablecoins can essentially function as tokenized versions of fiat currency, offering high liquidity and seamless integration with existing banking infrastructure.
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Consortium model aims to balance innovation with oversight and risk management
By adopting a consortium structure, the participating banks aim to balance innovation with risk management, jointly overseeing technology development, issuance protocols, and regulatory compliance.
The initiative is part of South Korea’s broader digital finance transformation and aligns with ongoing interest from regulators in creating secure, interoperable digital payment systems.
This stablecoin venture could significantly influence Korea’s digital currency landscape, offering a state-compliant alternative to decentralized stablecoins and possibly setting the stage for further institutional involvement in blockchain-based financial products.
If successful, it may serve as a model for similar collaborations in other countries.
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Joint stablecoin infrastructure, corporation likely by year-end pending legal reforms
South Korean banks are currently discussing joint infrastructure for a stablecoin initiative, with the formation of a joint corporation expected by late this year or early next year, pending legal reforms.
While the final issuance method for the Korean won-based stablecoin is yet to be decided, two models are under technical and legal review.
The first is the trust model, where customer funds are entrusted to a separate entity before coin issuance, enhancing transparency and security.
The second is the deposit token model, where coins are issued in a 1:1 ratio with actual bank deposits, allowing seamless integration with the banking system. These reviews aim to ensure regulatory compliance while advancing digital currency innovation in the country.
First unified entry of Korean banks into digital assets via consortium
This move is significant as it marks the first coordinated entry of South Korea’s banking sector into the digital asset space through a consortium.
By exploring a Korean won-backed stablecoin, banks are embracing blockchain technology while maintaining regulatory oversight.
The initiative could modernize payment infrastructure, enhance transaction efficiency, and offer a compliant alternative to decentralized stablecoins.
It also signals growing institutional confidence in digital finance and may pave the way for future developments in tokenized banking services.
If successful, this model could serve as a blueprint for stablecoin adoption by traditional financial institutions worldwide.
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