South Korea has launched an expanded real world pilot of its digital won, bringing more banks and new payment use cases into testing.
Key Takeaways
- Bank of Korea expands Project Hangang to nine banks with the addition of Kyongnam Bank and iM Bank.
- Phase 2 introduces real world use cases including subsidies, peer to peer transfers, and merchant payments.
- Hybrid CBDC model combines wholesale CBDC with deposit tokens for everyday transactions.
- Regulatory delays around stablecoins continue to impact broader digital asset policy.
What Happened?
The Bank of Korea has kicked off Phase 2 of its digital won pilot under Project Hangang, expanding participation to nine commercial banks. The program will test deposit tokens backed by central bank infrastructure in real world scenarios such as government subsidies and everyday payments.
The move signals a stronger push toward commercialization, even as regulatory debates around stablecoin issuance continue to delay South Korea’s broader digital asset framework.
🚨 South Korea’s Central Bank Digital Won Pilot Enters Phase 2 with Two New Banking Partners
— 0xzx (@0xzxcom) March 18, 2026
The Bank of Korea (BOK) has officially launched the second phase of its central bank digital currency (CBDC) pilot program, partnering with nine commercial banks to test deposit token…
Project Hangang Enters Expanded Testing Phase
The Bank of Korea has added Kyongnam Bank and iM Bank to its ongoing digital currency initiative, increasing the number of participating banks from seven to nine. This expansion marks a critical step toward scaling the country’s central bank digital currency efforts.
Phase 2 builds on earlier trials conducted between April and June 2025, where over 114,000 transactions were processed across retail stores and online platforms. While initial adoption remained modest, the new phase aims to significantly expand usage and participation.
Banks involved in the pilot are integrating the system directly into their existing applications. They are also covering their own development costs, while the central bank continues to support core infrastructure and consulting through October 2026.
Hybrid CBDC Model Takes Shape
At the center of Project Hangang is a hybrid digital currency model. This structure combines a wholesale CBDC issued to financial institutions with blockchain-based deposit tokens distributed to users.
This design allows the system to bridge traditional banking with modern digital payments. According to officials, the model offers flexibility by enabling deposit tokens to move freely across institutions, unlike many existing stablecoins.
“The system we are preparing under Project Hangang can be seen as a middle ground,” said Kim Dong-seop, head of the Bank of Korea’s Digital Currency Planning Team.
New Features and Real World Use Cases
Phase 2 introduces several upgrades focused on usability and real world application. One of the key additions is peer-to-peer transfers, which were difficult to implement during the first phase.
Other new features include:
- Biometric authentication, such as fingerprint login.
- Automatic conversion of deposits into tokenized balances.
- Integration with merchant payment systems.
- Support for AI-driven transactions through automated agents.
The Bank of Korea is also focusing on reducing transaction costs. The system is designed to offer a lower cost alternative to credit card payments, which currently place a financial burden on both small merchants and large businesses.
Kim Dong-sub, who leads the central bank’s digital currency planning efforts, said participating banks are exploring high impact use cases where payment fees can be significantly reduced.
Government Subsidies and Public Payments in Focus
A major highlight of the new phase is the integration of government subsidy programs into the digital currency system.
Officials plan to begin distributing subsidies in digital currency within the first half of 2026, with electric vehicle charging incentives expected to be among the first applications. These payments will be programmable, allowing for real-time tracking and automated compliance using smart contracts.
The system also enables government funds to move across multiple banks, improving transparency and reducing reliance on a limited number of intermediaries.
Regulatory Uncertainty Still Looms
Despite the progress, South Korea’s broader regulatory framework remains unresolved. The Digital Asset Basic Act has been delayed due to disagreements among regulators, particularly over who should have the authority to issue KRW pegged stablecoins.
This uncertainty continues to shape the pace and direction of the country’s digital asset strategy, even as technical development moves forward.
CoinLaw’s Takeaway
I see this as a very practical move by South Korea. Instead of rushing into a fully centralized digital currency or letting private stablecoins dominate, the Bank of Korea is testing a balanced system that actually works in real life.
In my experience, the biggest challenge with CBDCs is not the technology but adoption. What stands out here is the focus on real use cases like subsidies, merchant payments, and even AI driven transactions. That is where true value gets created.
If Phase 2 succeeds, South Korea could quietly set a global standard for how digital currencies integrate with everyday finance without disrupting the banking system too aggressively.
