Bank of Korea to expand second phase of CBDC pilot program to nine banks

The Bank of Korea plans to launch the second phase of its CBDC pilot, Project Hangang, in September. Primarily, the initiative relies on a blockchain-based wholesale CBDC issued by the central bank to back the settlement of commercial bank deposit tokens, used in everyday payments. 

The second phase expands the pilot from seven to nine banks, adding Kyongnam and iM Bank. The initial seven were KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, IBK Industrial Bank of Korea, and Busan Bank.

According to reports, all the involved banks are finalizing preparations for the next stage of live deposit token transaction testing. Assuming the remaining system development and participant enrollment are completed on schedule, actual trading is likely to begin in September. 

Unlike a retail CBDC issued directly to consumers, Project Hangang focuses on wholesale CBDC infrastructure that allows commercial banks to issue digital deposit tokens. These tokens are just regular bank deposits but are transferred and settled using distributed ledger technology, with the Bank of Korea providing the underlying settlement layer.

The expanded pilot will introduce several new capabilities. Participants will be able to conduct peer-to-peer wallet transfers, and wallet limits will increase substantially.

Wallet balances will go from 1 million won to 10 million won, with cumulative holding limits going from 5 million won to 100 million won. The number of users will be increased from about 100,000 in the first trial to as many as 500,000.

Project Hangang’s second phase will focus on advancing commercialization

Running from April to June 2025, the first phase of Project Hangang concentrated on payment infrastructure and recorded 114,880 deposit token transactions by roughly 81,000 participants. During the phase, the Bank of Korea onboarded only leading merchants from each sector. 

On the other hand, in the second phase, the Bank of Korea will prioritize efforts to pave the way for commercial adoption. The participating banks will include their MOU partner merchants in the program and introduce peer-to-peer transfers, biometric security, and automated deposit token functionality.  

A Bank of Korea official confirmed, “The Bank of Korea will provide the infrastructure for the institutional CBDC, and each bank will conduct its own business using deposit tokens. From the second phase, we will lay the groundwork for commercialization.” 

Phase two will also test the distribution of government subsidies using deposit tokens. Kicking off the demonstrations is the Ministry of Climate, Energy, and Environment’s subsidy program for EV charging infrastructure. Officials intend to partially replace traditional cash subsidies for EV charging operators with bank-issued deposit tokens. 

South Korea is advancing legal frameworks for its won-stablecoin

Meanwhile, the South Korean government is still working on legal frameworks for won stablecoins to advance currency convertibility under the upcoming Digital Asset Basic Act.

Ideally, the bill aims to integrate stablecoins into local markets while boosting international payment flows. Foreigners will be able to hold won accounts at overseas banks, and trade won among themselves. Moreover, won-backed stablecoins will gain official status as a distinct issuance class per the proposal.

The Bank for International Settlements reported that, as of December last year, the won accounted for 1.8% of global foreign exchange trading, ranking 12th among global currencies.

At the time, the dollar accounted for 89.1% of global trade, followed by the euro, yen, sterling, and yuan. Even then, the government acknowledged that the country’s 1.8% share of global trade underperforms South Korea’s gross domestic product. 

Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.