Bank of Korea Advances Digital Currency Initiatives
In a significant step toward advancing its digital currency initiatives, the Bank of Korea (BOK) has initiated Phase 2 of Project Hangang, which aims to further test the digital won in real-world scenarios. Announced on March 18, this expansion invites more banks into the fold and introduces advanced programmable payment capabilities that align with increasing efforts to bring the digital currency closer to market readiness, following earlier setbacks due to discussions surrounding stablecoins pegged to the won.
Overview of Project Hangang
The first phase of Project Hangang, which took place from April to June 2025, engaged seven major banks in South Korea and served tens of thousands of users, processing over 114,000 transactions. However, the rate of acceptance and usage was relatively low. In this new phase, the consortium of banks has grown to include BNK Kyongnam Bank and iM Bank, leading to a total of nine banks participating in the pilot.
Hybrid Methodology and Innovations
Project Hangang employs a hybrid methodology, which integrates wholesale central bank digital currency (wCBDC) solutions for financial institutions and blockchain-powered deposit tokens designated for consumer transactions. This model seeks to merge traditional banking frameworks with modern, programmable digital payment systems.
Starting this second phase, banks will be responsible for adapting the digital won system into their existing platforms while covering the development expenses themselves. The central bank, meanwhile, will facilitate the foundational infrastructure and provide consulting services until October 2026.
User Experience Enhancements
Phase 2 promises to enhance user experience through several innovations, including:
- Person-to-person transfers
- Biometric authentication options like fingerprint login
- The automatic conversion of traditional bank deposits into digital tokens when users’ wallets require replenishment
Moreover, the initiative aims to ensure smoother government payment processes, integrating programmable payment systems for public subsidies and vouchers, such as a pilot scheme for electric vehicle charging incentives overseen by the Ministry of Climate, Energy, and Environment. This integration also allows for real-time tracking of funds and dynamic compliance checks facilitated by smart contracts.
Funding Transparency and Future Goals
In an effort to bolster funding transparency and effectiveness, officials are also investigating broader treasury disbursement systems, enabling government transactions to occur across a wide array of banks. This initiative aims to improve clarity and efficiency in managing large public funds. With an expectation that participation will rise, both small and large businesses are anticipated to join the endeavor, lured by lower transaction costs relative to standard payment methods and the benefits of automated payments.
“The framework we are developing can be viewed as a compromise,” remarked Kim Dong-seop, head of the BOK’s Digital Currency Planning Team, emphasizing that the new deposit tokens can be transferred easily across various institutions, unlike many current stablecoins.
Looking Ahead
Looking ahead, the project’s overarching aim is to create a low-cost and interoperable digital payment system while facilitating the emergence of innovative financial services, including tokenized asset transactions. The Bank of Korea is also contemplating future scenarios where parts of the national budget expenditures could transition to digital formats.
Phase 2 is set to roll out early pilot programs focusing on subsidies in the first half of 2026, with larger-scale real-world transaction tests occurring later that year. The outcomes of these trials will be crucial for determining the potential commercialization of the digital won and any necessary regulatory adaptations.
