The Bank of Korea (BOK) has officially launched the second phase of its flagship blockchain initiative, Project Hangang, marking a significant expansion of South Korea's digital currency pilot. The project now includes nine commercial banks, up from seven, and for the first time will use CBDC-linked deposit tokens for real government subsidy disbursements.
Phase 2 adds Kyongnam Bank and iM Bank to the original participants: KB Kookmin, Shinhan, Woori, Hana, NH Nonghyup, IBK Industrial, and BNK Busan Bank. The pilot, conducted jointly with the Financial Services Commission and the Financial Supervisory Service, will test deposit tokens across two core use cases: government subsidy distribution and nationwide consumer payment and transfer services.
The move follows Phase 1, which ran for three months from April 2025 and involved up to 100,000 participants. However, that initial test revealed significant friction, with only around 80,000 users opening digital wallets and total payment volume reaching a modest 692.46 million won. This was despite banks spending an estimated 30–35 billion won on the underlying infrastructure, raising concerns about commercial viability.
To address these gaps, Phase 2 introduces new features including biometric authentication via fingerprint for payments, direct peer-to-peer (P2P) wallet transfers, and an automatic top-up function. The most consequential addition, however, is the integration of live government subsidy payments. South Korea's government distributes vast sums through social welfare programs, and the BOK aims to enhance fiscal efficiency by reducing misuse and cutting administrative costs. The pilot is designed to handle a potential flow of 110 trillion won in subsidies.
The BOK has carefully framed the project's ambitions, describing the digital currency being tested as "an intermediate stage between a CBDC and stablecoins." The central bank emphasized that Project Hangang is not about immediately launching a full retail CBDC, but rather a real-transaction test of future public financial infrastructure. For commercial banks, it represents an opportunity to prepare for potential future institutionalization.
Large-scale follow-up transactions with all nine banks are planned for the second half of 2026, with objectives including reducing payment fees for small businesses and building infrastructure for new industries like AI-based automatic payments. The launch comes weeks after the BOK published a report urging regulators to restrict early issuance of won-backed stablecoins to licensed banks, reinforcing Seoul's preference for a controlled, bank-led path to digital currency adoption.
