Bank of Korea governor backs CBDC and deposit tokens, silent on stablecoins
Shin Hyun-song's omission of won-pegged stablecoins in his inaugural address signals a shift away from the instrument he publicly criticised at BIS.
Briefing
- •Shin Hyun-song, who began his four-year term on Tuesday, pledged to advance Project Hangang's second phase, a wholesale blockchain-based CBDC pilot, and to expand deposit token use.
- •Shin made no mention of won-pegged stablecoins despite active South Korean legislative efforts to legalise them under the Digital Asset Basic Act, with discussions expected to resume after June 3 elections.
- •During his tenure as BIS head of the Monetary and Economic Department, Shin published a paper arguing stablecoins fail the monetary property of 'unity' due to blockchain fragmentation across chains with differing fees, security and decentralisation.
- •The BOK had reportedly paused its CBDC work last year as stablecoin momentum grew; the new governor's address suggests a reorientation back toward central bank-controlled digital instruments.
- •South Korea's Ministry of Economy and Finance is separately preparing a tokenized deposit pilot for selected government expenses, with a full rollout targeted for Q4 2026 beginning in Sejong City.
- •Shin also cited plans to modernise currency markets for 24-hour foreign exchange trading and to increase scrutiny of crypto markets and non-bank finance.
Why it matters
- →The BOK governor's explicit endorsement of Project Hangang Phase 2 and deposit tokens, combined with silence on won-pegged stablecoins, signals that South Korea's central bank will actively compete with private stablecoin issuers for institutional digital settlement infrastructure. The Ministry of Finance's Q4 2026 tokenized deposit rollout in Sejong City creates a government-backed reference deployment that crowds out private stablecoin adoption in the public sector before the Digital Asset Basic Act framework is finalized.
- →Ripple's existing Kyobo Life pilot for tokenized Korean government bond settlement is now operating in a regulatory environment where the BOK is reorienting toward central bank-controlled digital instruments. If Project Hangang Phase 2 advances as the dominant wholesale settlement layer, private blockchain infrastructure providers including Ripple face displacement from the institutional settlement stack they have been building relationships to enter.
Historical Context
- 2022-2023
The BIS, where Shin previously led research, published multiple papers arguing retail CBDCs and tokenized deposits should anchor digital money systems rather than stablecoins. Shin's own 'singleness of money' framework from that period is now being operationalized directly through BOK policy, closing the loop between BIS research and central bank implementation.
- May 2022
The Terra/LUNA collapse wiped out the UST won-adjacent algorithmic stablecoin ecosystem and triggered South Korean regulatory trauma, directly motivating the multi-year legislative caution around stablecoin legalization that now sits unresolved in the Digital Asset Basic Act.
Connected Events
Ripple and Kyobo Life pilot tokenized Korean government bond settlement
Ripple's partnership with Kyobo Life to pilot tokenized Korean government bond settlement positions the firm inside South Korea's token securities infrastructure at the same moment the BOK governor is steering digital settlement toward central bank-controlled instruments, creating a direct conflict of architectural vision.
Tether backs Drift Protocol with up to $127.5m after $280m Solana exploit
Drift Protocol's migration from USDC to USDT following Circle's slow freeze response demonstrates that DeFi protocols are making infrastructure choices based on issuer responsiveness, the same competitive dimension that makes BOK's deposit token model, with direct central bank control over freezing and settlement, structurally attractive to Korean financial institutions over private stablecoin alternatives.
