South Korea is reviving its central bank digital currency program to distribute government subsidies as its bet on a stablecoin takeover seems to be stalling.
The Bank of Korea (BOK) recently sent an official document to major lenders notifying them that it’s preparing for the second phase of the CBDC project. According to local outlet Decenter, a central bank official stated that details of the rollout, “including the specific method and schedule, are currently under discussion.”
The second phase will focus on distributing government subsidies. The East Asian nation has been distributing billions of dollars annually to stimulate spending and boost the economy. In a supplementary budget unveiled in June, the government allocated KRW 10.3 trillion ($7 billion) in cash handouts, with an additional KRW 600 billion ($400 million) in regional gift certificates geared toward supporting local spending.
A BOK official stated that the CBDC will boost efficiency in the distribution of funds while reducing management and distribution costs.
Currently, the South Korean government depends on credit cards linked to residents, bank accounts, and digital vouchers issued by local governments to distribute the subsidy.
Local lenders have signaled that they have no choice but to start preparing for the new pilot, and many have started putting systems in place to support the digital won’s distribution.
South Korea was among the first major economies to embrace CBDCs. Its first pilot was four years ago and focused on the issuance, distribution, and redemption of the digital won. After a hiatus, it restarted the project in April 2025, with participants in a limited pilot experimenting with deposit tokens.
Three months later, it halted the CBDC initiative once again, with the new administration shifting its focus to stablecoins. It even renamed and refocused its CBDC team.
However, South Korea’s stablecoin bet has stalled, with the two main regulators—the central bank and the Financial Services Commission (FSC)—clashing over industry oversight. While the former has favored a stringent regime to protect investors and preserve its role in setting the monetary policies, the FSC prefers a relaxed framework that prioritizes innovation.
President Lee Jae-myung took power on the promise of making South Korea a stablecoin hub, and his allies in government are backing the full-throttle FSC approach. They have dismissed the top bank’s concerns, claiming that the primary goal must be to keep up with Japan, Hong Kong, and the Western world.
This stalemate threatens South Korea’s promising stablecoin movement, which has already seen the launch of the first won-backed token. Even if the progressives have their way—and they likely will, as Lee’s Democratic Party controls parliament—the central bank is still in charge of licensing and registration, and it could use its authority to influence developments indirectly.
Watch: Finding ways to use CBDC outside of digital currencies
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Source: https://coingeek.com/south-korea-revives-cbdc-program-for-government-subsidies/
