South Korea is moving into the next stage of its central bank digital currency initiative by expanding nationwide testing of deposit token based payments, marking one of the country’s most significant steps toward modernizing its digital payment infrastructure.
The Bank of Korea, working alongside the Financial Services Commission, will launch the second phase of Project Hangang in September. The expanded pilot increases participation from seven to nine commercial banks and broadens access to consumers and merchants across the country. The initiative is designed to evaluate real world payments using bank issued deposit tokens that operate on infrastructure provided by the central bank.
Expanding Real World Digital Payments
Unlike a retail CBDC held directly by consumers, the project allows participating commercial banks to issue deposit tokens backed by wholesale central bank digital currency infrastructure. Consumers will use these tokens for everyday transactions while banks continue managing customer relationships.
The second phase introduces several new capabilities, including:
- Peer to peer transfers between users
- Biometric authentication for payments
- Automated deposit and withdrawal functions
- Expanded merchant acceptance through participating banks
- Wider customer participation than the initial pilot
Officials also plan to test programmable payments for government services, including electric vehicle charging subsidies and selected public sector expenses. The blockchain based design allows authorities to define where and when certain funds can be spent, reducing the risk of misuse.
Building Toward Commercialization
The expanded pilot represents a major milestone in South Korea’s broader digital currency strategy. Nine major banks are expected to participate, including KB Kookmin, Shinhan, Hana, Woori, NH NongHyup, IBK, Busan Bank, Gyeongnam Bank, and iM Bank.
Authorities say the Bank of Korea will continue providing the underlying wholesale CBDC infrastructure while commercial banks issue and manage customer facing deposit tokens. The open ended testing period is intended to establish the technical and regulatory foundation for potential commercialization of a digital won.
South Korea has positioned the initiative alongside broader digital asset reforms, including efforts to develop a regulatory framework for stablecoins and other blockchain based financial services. If successful, Project Hangang could become one of the world’s most advanced large scale CBDC payment experiments and offer valuable insights into how central banks and commercial lenders can jointly operate tokenized payment systems.
