South Korea's Stablecoin Race

KakaoBank Builds Infrastructure as Tech Giants Compete for Digital Won

KakaoBank is building blockchain infrastructure for a Korean won stablecoin, moving beyond exploration into active development. The digital bank—backed by South Korea's dominant internet conglomerate—is now recruiting blockchain engineers and constructing the technical foundation for on-chain financial services.

From Research to Development

According to Seoul-based outlet Newspim, KakaoBank is advancing work on a smart contract FX settlement system that could underpin a KRW-backed stablecoin. The bank's website now lists positions for blockchain service backend developers, seeking expertise in smart contracts, token standards, and full-node operations.

The infrastructure spans everything needed to issue and manage digital assets—smart contract execution, token standards, full-node operations, and back-end systems for both stablecoins and tokenized securities.

CFO Kwon Tae-hoon signaled the direction during the bank's H1 2025 earnings release, noting KakaoBank was "reviewing various options to partake in digital finance, such as the issuance or custody of digital assets."

The Trademark Trail

Kaia, the blockchain formed from merging Kakao's Klaytn network and LINE's Finschia, registered four KRW-related trademarks with the Korean Intellectual Property Office in August: "KRWGlobal," "KRWGL," "KRWKaia," and "KaKRW."

KakaoPay, the group's payments arm, filed six additional trademark applications for potential stablecoin tickers: PKRW, KKRW, KRWP, KPKRW, KRWKP, and KRWK.

The proliferation of trademarks suggests Kakao is preparing multiple product concepts or branding approaches—hedging across business units until regulatory clarity emerges.

"Discussions related to stablecoins are extremely sensitive right now, so I'm not able to comment on the article," Sam Seo, chairman at the Kaia DLT Foundation, told Decrypt. "For now, the only thing I can share is that Kaia is in talks with several teams in Korea about a KRW stablecoin POC."

The Competitive Landscape

KakaoBank's biggest rival, Naver, is pursuing a different strategy—merging Naver Financial with Upbit, South Korea's largest cryptocurrency exchange, in a 20 trillion won deal. That merger would unite Naver's payment infrastructure (80 trillion won in annual payments) with Upbit's exchange liquidity and crypto user base.

Traditional banks—Shinhan, Kookmin, and others—are working together to "share the risk and handle regulations together," noted Joony Koo, co-founder of Spacebar.xyz. KakaoBank is "doing the opposite" and "playing to their strength in retail."

A coalition of eight commercial banks including KB Kookmin, Shinhan, Woori, and NongHyup is also developing a won-pegged stablecoin under shared infrastructure, with two models under legal review: a trust-based structure or 1:1 deposit-backed token.

The Distribution Advantage

"Unlike other banks, Kakao owns the country's biggest chat app and a major payment system," Koo observed. "They can put stablecoins right where people already spend their time, making it much easier for regular users to adopt."

KakaoPay counts 42 million registered members and 24 million active monthly users—commanding position in South Korea's fintech market. Kakao's ecosystem serves over 49 million monthly active users, with near-universal reach across messaging, payments, and online banking.

That distribution network is the strategic advantage. While banks bring regulatory credibility and reserve management expertise, Kakao brings 95% of the population already using its platforms daily.

Regulatory Hurdles

"Korea's strict laws on sending money overseas" remains the "biggest hurdle," Koo told Decrypt. "A bank-issued coin might be the only way to offer fast, 24/7 transfers that still satisfy regulators who are very strict about tracking capital flow."

The Bank of Korea insists only registered banks should be permitted to issue won-stablecoins—a position that's triggered pushback from tech firms and fintech platforms.

President Lee Jae Myung has made KRW stablecoins a key initiative, aiming to protect monetary sovereignty against the dominance of U.S. dollar stablecoins. But legislative efforts have stalled, with debates continuing over licensing, reserve requirements, interest treatment, and the role of banks in issuance.

The government plans to require stablecoin companies to register with the central bank and file monthly reports by the second half of 2025.

The Use Case Challenge

"The challenge for KRW stablecoins is the lack of clear, compelling use cases compared to dollar stablecoins," Min Jung, senior analyst at Presto, told Decrypt. "Since the true value of stablecoins lies in reducing friction, particularly in cross-border payments rather than purely domestic use, these capital control issues must be carefully considered."

South Korea maintains strict capital controls under the Foreign Exchange Transactions Act, with capital transactions subject to separate procedures, documentation thresholds, and restrictions on offshore use.

Domestically, Korea's payment infrastructure already works efficiently. The won stablecoin's value proposition hinges on cross-border utility—precisely where regulatory friction is highest.

Strategic Positioning

KakaoBank occupies a unique position in this competition. As a licensed bank, it satisfies the Bank of Korea's preference for bank-issued stablecoins. As a tech-driven platform, it maintains the user relationships and distribution infrastructure that traditional banks lack.

The bank participated in both phases of the now-cancelled Bank of Korea CBDC pilot, providing regulatory experience and technical validation.

If successful, KakaoBank could become the blueprint for how South Korea balances innovation with financial control—a model where licensed banks issue compliant stablecoins, but tech platforms provide the user interfaces and distribution.

What Happens Next

"KRW stablecoins do not only mean the issuance of digital currencies but also signify that the Korean market legalizes digital asset-powered businesses," Seo noted.

The stakes extend beyond payments. Whoever establishes the KRW stablecoin infrastructure captures positioning for tokenized securities, DeFi integration, and the broader digitization of Korean financial services.

The competition will intensify as both Kakao and Naver attempt to leverage their ecosystems—each commanding tens of millions of users—while the government works to establish sovereign alternatives to dollar-denominated stablecoins.