South Korean Consortium completes test pilot of digital currency won by Kaia
A South Korean blockchain consortium has completed a proof of concept demonstrating blockchain-based local digital currency processing payments and settlements in less than one second with a reported success rate of 100%.
Summary
- IK STAR and BNK Busan Bank have completed a test pilot of a blockchain-based digital currency with a 100 percent transaction success rate and one-second processing.
- It’s a proof of concept for programmable money that can limit where money is spent, use expiration dates and automate merchant payments.
- The project adds to a growing list of stablecoin and digital currency pilots by South Korean banks as the country prepares for new digital asset regulations.
According to a South Korean news source Newsthe K-STAR consortium and BNK Busan Bank have completed a proof of concept (PoC) to test whether a blockchain-powered digital version of South Korea’s local currency system can work in a real banking environment.
The test covered the entire payment cycle, from issuing currency and loading funds into digital wallets to customer payments and merchant payments.
The consortium included BNK Busan Bank, AhnLab Blockchain Company, OpenAsset, Kaia, and Lambda256. Within the project, BNK Busan Bank designed a policy-based local currency model based on the country’s existing regional currency framework while ensuring charging, payment, and settlement functions.
AhnLab Blockchain Company developed the project’s architecture, digital wallet, and transaction infrastructure, while OpenAsset handled the stablecoin issuance and asset consensus. Kaia provided the blockchain mainnet environment, and Lambda256 managed node operations and monitored transaction activity.
Policy controls are embedded in digital currencies
Rather than testing simple blockchain transfers, the PoC focuses on programmable digital currencies that can handle policy scenarios. In accordance with Newsthe system allowed issuers to limit spending to authorized merchants, automatically expire unused balances after a predefined period of time, and apply different payment rules depending on merchant categories.
Performance testing was also part of the exercise. Using workloads modeled on BNK Busan Bank’s payment operations, the consortium tested the system under normal traffic, congestion, heavy load, and unusual mixed conditions, as well as 24-hour continuous operation. STAR said all transactions were completed successfully, with tax processing lasting less than one second throughout the testing period.
The consortium said the same technology could later support government subsidies, digital vouchers, central bank digital currency (CBDC) services and stablecoin applications backed by South Korea.
Stablecoin development is fast
The latest test comes as South Korea’s financial sector continues to expand blockchain payment trials ahead of a new digital asset law.
Last year, Upbit operator Dunamu confirmed that it would partner with Naver Pay on the Korean stablecoin winning system after Naver Pay announced that it would lead an industry consortium that carried out the project.
The partnership followed President Lee Jae-myung’s June 29 pledge to allow companies to issue sponsored stablecoins, while several of the country’s major banks also launched their own stablecoin partnerships.
The K-STAR consortium’s work also follows similar pilots across South Korea’s banking sector. This May, KB Financial Group completed a proof-of-concept for a win-denominated stablecoin that tested retail payments, merchant payments and cross-border remittances using Kaia and OpenAsset infrastructure.
Earlier in April, Shinhan Card partnered with the Solana Foundation to test stablecoin payments on blockchain infrastructure, including non-custodial wallets and retail payment scenarios, as financial institutions prepare for the country’s evolving digital asset framework.
