Authored by: Kurumi, CryptoCity
South Korea’s Digital Won Pilot Enters Advanced Phase: Project Hangang Expands Real-World Testing
South Korea is set to take a significant leap forward in its central bank digital currency (CBDC) journey. The Bank of Korea (BOK) is gearing up to launch the second phase of “Project Hangang” as early as September, marking a pivotal expansion of its digital won pilot program. This ambitious phase will not only increase the number of participating banks from seven to nine but, crucially, will introduce real-world transaction testing, moving the initiative closer to everyday financial use.
At its core, Project Hangang utilizes a wholesale CBDC for inter-financial institution clearing, while commercial banks will issue “deposit tokens” for consumers and merchants to conduct daily payments. This hybrid model aims to balance central bank oversight with commercial bank innovation.
A BOK official highlighted that Phase Two will see the central bank establishing the foundational institutional CBDC infrastructure. In parallel, participating banks will be empowered to leverage these deposit tokens to develop and expand their own business models, laying a robust groundwork for future commercialization of the digital won.
Unlike the first phase, which primarily focused on validating core payment infrastructure, the upcoming September tests are designed to simulate real-life financial scenarios. The objective is to thoroughly assess the digital won’s capability to support diverse needs, including seamless inter-bank transfers, merchant payments across various platforms, and the efficient distribution of public funds.
Project Hangang Phase Two: Expanding Reach and User Engagement
The second phase welcomes Kyongnam Bank and iM Bank into the fold, bringing the total number of participating financial institutions to nine. They join established players such as KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Financial Group – all major pillars of South Korea’s financial landscape. These banks will be instrumental in issuing and managing deposit tokens built upon the BOK’s infrastructure, enabling users to engage with the digital won via their existing bank wallets or integrated payment interfaces.
A significant scaling-up in user participation is also on the horizon. The pilot’s user cap will be dramatically expanded to 500,000 individuals, a substantial increase from the first phase. Project Hangang’s initial run, conducted from April to June 2025, saw approximately 81,000 wallets opened, facilitating around 114,900 transactions across 12,000 participating merchants. However, reports indicated limited actual usage, with only about 42% of account holders making purchases. This insight has directly influenced the design of Phase Two, which now places a strong emphasis on enhancing practical utility and supporting high-frequency payment scenarios to drive adoption.
Innovating Payments: P2P, Biometrics, and Programmable Government Subsidies
Phase Two is poised to introduce an array of advanced features that mirror and even enhance traditional banking services. These include person-to-person (P2P) transfers, biometric payment authentication, automatic top-ups, recurring automatic payments, digital cash receipt generation, and even interest payments on deposit tokens. To boost daily payment convenience, the system will allow for automatic fund conversion from linked bank accounts if a user’s deposit token balance is insufficient.
Perhaps the most groundbreaking addition is the BOK’s inaugural test of issuing government subsidies using programmable deposit tokens. This innovation opens the door for government funds to be directly disbursed to designated recipients via digital wallets, complete with built-in functionalities for usage restrictions, conditional spending, and transparent transaction tracking. Should this test prove successful, it could revolutionize the distribution of welfare benefits, local stimulus vouchers, or specific policy funds, making the process more immediate, cost-effective, and auditable than ever before.
A Dual Path: Digital Won and Stablecoins Accelerate South Korea’s Financial Digitalization
Project Hangang’s architectural design represents a sophisticated middle ground, bridging the gap between a central bank-issued CBDC and commercial bank-issued deposit tokens. The general public will interact with the latter for everyday transactions, while the wholesale CBDC will underpin the crucial inter-financial institution clearing processes in the backend.
Kim Dong-seop, head of the Bank of Korea’s digital currency planning team, aptly described this innovative framework as a “compromise between a CBDC and stablecoins.”
Concurrently with the BOK’s CBDC initiatives, South Korean commercial banks are also actively developing infrastructure for KRW stablecoins. Hana Bank, for instance, is already designing comprehensive systems for the issuance, redemption, settlement, digital wallet management, and anti-money laundering (AML) protocols necessary to support future KRW stablecoins. Furthermore, the South Korean government is planning to update its 70-year-old National Asset Law to formally classify cryptocurrencies as national assets. This multi-pronged approach – advancing CBDC, deposit tokens, and KRW stablecoins in parallel – underscores South Korea’s unwavering commitment to integrating digital currencies into a broader, modernized financial infrastructure.
(The above content is an excerpt and reproduction authorized by our partner CryptoCity.)
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