Bank of Korea launches Phase 2 of digital winner pilot with real funding
Bank of Korea has launched Phase 2 of Project Hangang, expanding its digital winning pilot to nine banks and, for the first time, using CBDC-linked deposit tokens for real government funding payments.
Summary
- BOK’s Project Hangang Phase 2 expands its entire CBDC and deposit token pilot from seven to nine banks and introduces live payment of government subsidies as a core test case.
- New features such as biometric authentication, P2P wallet transfer and automatic additions are aimed at correcting the weak engagement of Phase 1, where only 80,000 users out of 100,000 invited opened wallets and the volume remained below 700 million won despite the infrastructure gains achieved of 30–35 billion.
- Seoul positions the deposit tokens as “an intermediate stage between CBDC and stablecoins,” tying the pilot to a potential $110 million funding stream and future AI-powered automated payments rather than chasing a full retail CBDC.
The Bank of Korea (BOK) officially launched the second phase of Project Hangang on Wednesday, its flagship plan to build a blockchain-based payment infrastructure using central bank digital currency (CBDC) and bank deposit tokens. The expansion marks a significant step forward in South Korea’s digital currency ambitions, expanding the project from seven to nine participating commercial banks and introducing government-sponsored live payments for the first time.
Phase 2, officially called “Project Hangang Phase 2,” adds Kyongnam Bank and iM Bank to the original seven institutions – KB Kookmin, Shinhan, Woori, Hana, NH Nonghyup, IBK Industrial, and BNK Busan Bank. This project is carried out in collaboration with the Financial Services Commission and the Financial Supervisory Service, and includes the assessment of the real situation of deposit tokens in all two critical situations of use: the distribution of government funding and the payment and transfer services of consumers throughout the country.
Phase 1 of Project Hangang, which lasted about three months from April 2025, onboarded up to 100,000 participants and recorded 118,000 payments, confirming that a payment system based on deposit tokens can work stably in a live environment. However, the pilot revealed a major contradiction: while 100,000 citizens were invited to participate, only about 80,000 opened digital wallets, and the total amount of payments reached only 692.46 million won – modest figures that prompted the banks, which together spent about 30-35 billion building commercial infrastructure, to raise concerns about the operation.
BOK addressed those gaps directly in Phase 2. New features include fingerprint biometric authentication to authorize payment, direct peer-to-peer transfers between digital wallets, and an automatic top-up function that converts funds from a linked bank account into deposit tokens when the wallet balance is low. The BOK has framed the development as a logical step towards integration and interoperability with existing electronic payment systems.
One of the most impactful additions to Phase 2 is the consolidation of government funding. The South Korean government is distributing large sums of money through welfare programs – a BOK representative noted that Project Hangang is designed to improve financial efficiency by reducing misuse and reducing administrative costs associated with the current system of credit cards, locally issued vouchers, and bank accounts. The government is looking to allocate part of its $499 billion budget to CBDC-linked distribution infrastructure, making the funding pilot a test case with implications beyond retail payments.
BOK was careful to set the project’s ambitions modestly. In its announcement, it described the digital currency being tested as “an intermediate stage between CBDC and stablecoins,” and emphasized that Project Hangang is not based on a quick launch of a full retail CBDC, but rather a real transactional test of how public financial infrastructure can work in a digital environment. For commercial banks, the BOK added, “it would be an opportunity to try to use it early to prepare for the possibility of establishing institutions in the future.”
The actual major follow-up transaction with all nine banks is planned for the second half of 2026, with the stated goal of reducing payment fees for small business owners and creating a financial infrastructure connected to new industries – including automated payments based on AI. LG CNS, which is building the basic technical infrastructure for Phase 1, remains the main program partner.
The launch comes a few weeks after the BOK published a report in February 2026 separately urging regulators to place restrictions on the early issuance of stablecoins backed by licensed banks, highlighting the risk of fraud and financial stability – a situation that reinforces Seoul’s preference for a regulated, bank-led approach to digital currency adoption rather than the vision of some open model.
