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South Korea’s decision to shelve its central bank digital currency pilot in favor of private-sector stablecoins has sparked a wave of activities among fintechs and banks.

As CoinDesk previously reported , KakaoBank is weighing both issuance and custody roles, while Upbit and Naver Pay are collaborating on a payments-focused token that could help close the “kimchi premium” gap between local and global crypto prices.

The opportunity comes as Korea is moving to extend FX trading hours , allow more foreign participation in its onshore market, and position itself for inclusion in major global bond and equity indices. A regulated KRW stablecoin could fit into these modernization plans, offering faster settlement and tighter integration between banking and digital asset markets.

But any Won stablecoin effort is going to run into a massive wall: Korea's currency is not fully internationalized.

Since the Asian Financial Crisis of 1997, Korea has kept deliverable KRW trading entirely onshore . Foreign institutions cannot exchange won among themselves abroad, and every dollar–won transaction must be settled through domestic intermediaries under the Bank of Korea's supervision.

Authorities in Seoul maintain this system to monitor speculative flows, contain volatility, and preserve monetary policy autonomy.

So for a Won stablecoin to work, it would have to be only used with whitelisted, KYC-verified addresses that have some tie to Korea.

If a privately issued stablecoin becomes too dominant, it can erode a country’s control over its currency, encourage “unintended dollarisation,” and weaken the central bank’s ability to manage employment and price stability, Vera Yuen, a professor at Hong Kong University's business school told CoinDesk in a note.

The question is, just how useful would this on-shore only stablecoin then be?

Domestic interbank transfers in Korea settle around the clock, 365 days a year. Sending money from one account to another is immediate, free, and widely used, leaving little payment friction for a KRW stablecoin to solve inside the country.

Without a speed or cost advantage in domestic transfers, the token’s primary utility would lie in cross-border settlement — and that is precisely where the onshore-only rule becomes a brick wall.