South Korea Introduces KRW1 Stablecoin, Secured by Won and Operated on the Avalanche Blockchain Infrastructure
South Korea has taken a significant step in the global stablecoin landscape with the launch of KRW1, a digital currency pegged 1:1 to the Korean won, by digital asset custodian BDACS on the Avalanche blockchain.
BDACS, a company that recently launched regulated XRP custody for institutions in South Korea, views KRW1 as part of the long-term infrastructure for the country's digital asset ecosystem. The regulatory framework for KRW1 will address collateral, issuance requirements, and internal controls.
The bank securing the KRW1 stablecoin is Hanwha Bank. The launch of KRW1 follows a successful proof-of-concept completed in partnership with Woori Bank. KRW1 offers real-time reserve verification through API, with reserves fully backed by escrowed won at Woori Bank.
BDACS has built an application framework to support user access, featuring peer-to-peer transfers and transaction validation. The application is designed to serve various financial use cases, including remittances, payments, digital investments, and public-sector programs like emergency relief.
Similar stablecoin initiatives are underway in Japan and Hong Kong. South Korea's move follows recent progress on regulation in the United States. The upcoming bill will establish South Korea's first unified rules for stablecoin operation, with authorities aiming to align local policies with global standards.
In a bid to expand KRW1, BDACS plans to extend it to other blockchain networks in future phases. This ambition is shared by several major banks in South Korea, including Kookmin Bank and Kakao Bank, who have filed for related trademarks for won-pegged stablecoins. FanC and Initech recently tested KRWIN, the first domestic stablecoin pilot.
A group of eight banks has also discussed creating a joint won-based digital asset. The legislation is expected to roll out in October as part of the Virtual Asset User Protection Act's second phase. The pilot phase of KRW1 aims to test its performance and functionality under regulated conditions.
Notably, South Korea has signed a deal with the Organisation for Economic Co-operation and Development (OECD) to adopt a worldwide crypto reporting system. This commitment underscores the country's dedication to fostering a transparent and secure digital asset ecosystem.
In conclusion, the launch of KRW1 marks a significant milestone in South Korea's digital asset landscape, signalling the country's intent to secure its position in the global stablecoin race. The regulatory framework, coupled with the support of major banks and the government, positions KRW1 as a promising contender in the stablecoin market.
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