South Korea Launches KRW1 — Won-Backed Stablecoin on Avalanche

USD1 from USA

South Korea has officially entered the stablecoin race with the launch of KRW1, a digital asset pegged 1:1 to the Korean won and issued on the Avalanche blockchain. The token is operated by BDACS, with fiat reserves secured at Woori Bank, one of the country’s oldest financial institutions. Although initially launched as a pilot, KRW1 signals South Korea’s intention to modernize its financial system and usher in the blockchain era.

The timing of this initiative is crucial. Seoul is currently pushing for the Digital Asset Basic Act, a law designed to regulate the issuance, reserve management, and transparency of stablecoins. The Bank of Korea has taken a cautious but open stance, acknowledging the efficiency benefits that won-based stablecoins can bring to payments and settlements, while warning of potential risks to capital flows and exchange rate stability. Therefore, launching KRW1 under strict supervision and with full fiat collateral is a test of both technology and regulation.

Distinctive design on Avalanche

The decision to build KRW1 on Avalanche reflects a clear focus on speed, scalability, and institutional trust. Avalanche offers near-instant settlement, making it an attractive option for payments and enterprise use cases. Its presence in South Korea through fintech and government pilot programs also makes it a familiar platform for compliance-oriented development. By deploying on Avalanche, KRW1 gains access to an ecosystem that is well-positioned for real-world adoption, beyond speculation.

Structurally, KRW1 is fully backed by deposits at Woori Bank, ensuring parity. The token is initially being tested in controlled pilot programs focused on payments, fintech integration, and potential government disbursements such as emergency relief programs or subsidies. If successful, it could expand to cross-border remittances, merchant payments, and tokenized financial assets, making KRW1 more than just a transactional tool.

Policy and market position

The launch of KRW1 comes as stablecoins dominate the global digital asset payments market, with a total market capitalization of around $280–300 billion. The market is still heavily skewed towards USD-pegged assets such as USDT (around $171 billion) and USDC (around $72 billion). By creating a Korean won-denominated stablecoin, policymakers and financial institutions aim to reduce the dependence on the dollar for domestic cryptocurrency transactions and payments, while also localizing liquidity in the Korean economy.

This is in line with a broader global trend. Other jurisdictions such as Japan and the European Union have moved to support non-USD stablecoins, aiming to ensure sovereignty over domestic payment channels. For South Korea — one of the world’s most dynamic retail crypto markets — the presence of a reliable, bank-backed stablecoin could reshape exchange liquidity, tighten spreads, and even pave the way for RWAs (Return On Investment) and DeFi (DeFi) instruments.

However, regulators remain cautious. The Bank of Korea has highlighted the risk that the stablecoin could accelerate capital flows into the stablecoin USD during difficult times. As such, the KRW1 will likely operate with strict compliance controls, whitelists, and monitoring of acquisitions until regulators gain more confidence. The government’s upcoming Digital Asset Basic Act will play a crucial role in shaping the wider use of the KRW1.

Disclaimer: The information presented in this article is the author's personal opinion in the cryptocurrency field. It is not intended to be financial or investment advice. Any investment decision should be based on careful consideration of your personal portfolio and risk tolerance. The views expressed in this article do not represent the official position of the platform. We recommend that readers conduct their own research and consult with a professional before making any investment decisions.