South Korea debuts KRW1 on Avalanche with Woori Bank reserves

Executive summary

South Korea introduces KRW1 on Avalanche with cash reserves held at Woori Bank and custody services by BDACS. The project starts in pilot mode after a completed proof of concept. The goal is simple. Move tokenized won through a fast and programmable network while keeping banking controls and audit trails. The design targets payments remittances and enterprise settlement with a focus on compliance and operational transparency.

What KRW1 is and how it works

KRW1 represents one Korean won held in a segregated bank account. Minting occurs only when fiat enters the reserve account. Redemption burns tokens and releases fiat to the user account after checks. Issuance uses an on chain controller that enforces allow lists and transfer rules. The network choice is Avalanche which supports short finality and high throughput for enterprise flows.

Issuer and banking setup

Reserves sit at Woori Bank in ring fenced accounts. BDACS provides custody for the treasury wallets and oversees mint and burn keys. Daily reconciliation compares on chain supply with bank ledger balances. Independent assurance reviews confirm controls and reserve sufficiency on a scheduled cadence. Clear language disclosure describes what happens in stress events and who bears losses within policy limits.

Network architecture on Avalanche

KRW1 uses a primary token contract with role based permissions. Treasury addresses handle mint and burn events. Approved participants move tokens across subnets or remain on the C Chain for broader interoperability. The design uses short block times to reduce settlement risk. Business logic can sit in a set of permissioned smart contracts that provide escrow billing and invoice matching.

Policy context in Korea

The product aligns with the virtual asset framework that is rolling out in phases. Consumer facing protections and disclosures are central. The pilot limits distribution to qualified participants while reporting flows to regulators. The roadmap includes retail access once testing proves stable operations and clear disclosures.

Threat Model Snapshot

Threat	Vector	Impact	Likelihood	Mitigation
Key compromise	Theft of treasury keys through phishing or malware	Loss of control of mint and burn functions	Low	Multi party key control cold storage access logs and strict role separation
Bank insolvency	Reserve bank enters resolution	Temporary suspension of redemptions and loss risk above insurance limits	Very low	Diversified reserve venues risk limits and legal segregation of client funds
Smart contract bug	Logic error in token or controller contracts	Stuck funds or unintended transfers	Medium	Formal audits bug bounties and upgrade timelocks with community notice
Oracle or pricing error	Wrong reference rate used in settlement apps	Mispricing and unfair transfers	Medium	Multiple data sources sanity checks and human in the loop for large flows
Compliance breach	Transfer to a sanctioned entity or blocked region	Regulatory action and forced blacklisting	Low	Allow lists travel rule checks and automated screening at mint and redemption

Defense Playbook in practice

1. Key management. Use multi party computation or hardware security modules with physical separation and periodic key rotation. Document break glass procedures with limits and time locks.
2. Reserve governance. Publish daily supply and reserve proofs with bank attestations. Add monthly assurance by a third party and quarterly stress scenarios.
3. Contract lifecycle. Stage contracts through dev test and main environments with reproducible builds. Require two party approvals for upgrades and set sensible timelocks.
4. Incident response. Maintain a live runbook with contacts for bank partner exchange partners and regulators. Run tabletop exercises every quarter.
5. Participant oversight. Enforce know your business standards. Require disclosure of settlement purpose and keep logs for audits.

Early use cases

Remittances for workers and students who need fast transfers with clear records. Merchant settlement for e commerce stores that want low cost finality. B2B netting for exporters and suppliers where invoice matching and escrow reduce disputes. Government pilots for coupons and rebates that require traceability.

What to watch in the first ninety days

Supply growth and redemption velocity. Turnover on chain and average transfer size. Wallet concentration and the share held by exchanges versus merchants. Uptime of mint and burn endpoints. Time from redemption request to fiat arrival. Number of audit artifacts published and their level of detail.