South Korea has launched a 9.6 billion won ($6.9 million) initiative to expand its central bank digital currency-based deposit token payment system into everyday commercial use, building on the Bank of Korea's earlier pilot program known as Project Hangang. The move places South Korea among a small group of jurisdictions actively moving CBDC experiments from sandbox testing toward consumer-facing payment rails, a transition that has proven challenging for central banks worldwide.

The Korea Internet & Security Agency (KISA) and the Ministry of Science and ICT announced on July 22 that they have begun a nationwide project to build payment infrastructure based on deposit tokens, extending the Bank of Korea's wholesale CBDC trial into retail payment services used by businesses and consumers.

The two agencies held a joint launch ceremony at KISA's headquarters in Seoul to formally begin the initiative, which was selected under the government's 2026 Blockchain Innovation Leading Project program. The program supports large-scale blockchain demonstrations targeting public services and new commercial use cases, with this year's winning proposal focusing on reducing payment processing costs for small businesses through deposit token payments.

The project will be led by the Korea Financial Telecommunications and Clearings Institute (KFTC). Nine commercial banks, eight payment gateway providers, and two large merchants have joined the consortium, which will develop and test payment services using deposit tokens issued on top of the Bank of Korea's wholesale CBDC infrastructure.

Project Hangang Moves Closer to Commercial Payments

Under the new program, KFTC will connect South Korea's existing payment network with the Bank of Korea's Project Hangang infrastructure, enabling participating institutions to process deposit token transactions through current banking rails rather than creating an entirely new payment system. The integration approach mirrors a broader design preference among central banks exploring CBDCs: leveraging existing interbank settlement and payment networks rather than building parallel infrastructure that could fragment the financial system.

Instead of replacing payment terminals, the project will allow consumers to pay using deposit token wallet applications issued by participating banks. Officials are also reviewing the possibility of introducing physical payment cards linked to deposit token wallets. Merchants would continue using their existing point-of-sale terminals without replacing hardware.

According to KISA, one of the project's primary goals is to convert the experience gained during Project Hangang's institutional CBDC pilot into payment services available for the general public. Authorities expect the approach to reduce settlement costs while easing payment fee burdens for small merchants.

Government agencies also plan to extend the technology beyond private-sector payments. Officials said deposit tokens will be tested for government business expense programs before eventually connecting with dBrain, South Korea's digital public finance platform, to support treasury management and other public spending functions. By applying programmable blockchain features, authorities said spending conditions can be defined in advance while improving transparency throughout the payment process.

The Ministry of Science and ICT said the initiative will also support South Korea's domestic blockchain industry. Of the total project budget, roughly 3 billion won has been allocated to development, operations, and promotional work involving small and medium-sized enterprises, startups, and information technology companies. Participating banks are separately expected to invest around 4.5 billion won in related projects connected to the payment infrastructure.

KISA Digital Infrastructure Division Director Shin Dae-gyu said the project represents the first stage of establishing a deposit token payment environment and could create opportunities for startups and IT companies to build new services on top of the infrastructure. He added that KISA would support secure implementation by drawing on its blockchain and cybersecurity expertise.

Expansion Follows Plans for Continuous Deposit Token Operations

The infrastructure rollout comes days after documents reviewed by the Korea Federation of Banks showed that the Bank of Korea and participating lenders had discussed operating deposit tokens on a continuous basis while preparing conditions for eventual commercialization.

As previously reported, the next phase of Project Hangang is expected to expand beyond payment validation by increasing the number of users and merchants, introducing person-to-person transfers, and allowing individual banks to develop their own deposit token services. The plans also include business-to-business treasury payments, with government subsidies linked to electric vehicle charging infrastructure among the proposed use cases.

Commercial banks previously told the central bank that the second phase would require significantly more investment than simply extending the first pilot because additional services would require anti-money laundering systems, fraud detection capabilities, suspicious transaction reporting functions, and new operational infrastructure. Following discussions with participating institutions, the Bank of Korea adjusted the project's timeline and provided commercialization consulting support.

South Korea has repeatedly distinguished deposit tokens from stablecoins despite both relying on blockchain technology. Deposit tokens represent commercial bank deposits issued through a wholesale CBDC framework operated by the Bank of Korea, while stablecoins are designed as separate digital assets backed by reserve assets under their own regulatory structure. This distinction has practical significance for monetary policy: because deposit tokens remain claims on commercial banks within the regulated banking system, they preserve the central bank's ability to oversee credit creation and financial stability, whereas privately issued stablecoins operate largely outside traditional monetary transmission mechanisms.

Alignment With Broader Digital Finance Strategy

The latest payment project also aligns with the government's wider digital finance strategy. Earlier this month, South Korea unveiled a roadmap to make the Korean won a freely convertible currency while introducing legal rules for won-backed stablecoins under the proposed Digital Asset Basic Act. The roadmap also included continued development of wholesale CBDC infrastructure, tokenized government bond pilots, and participation in the Bank for International Settlements' Project Agora for cross-border payment systems.

At the same time, financial institutions have continued testing separate blockchain payment models outside the CBDC framework. HashKey Group, Kbank, and BPMG recently signed an agreement to study won-backed stablecoins for cross-border payments and trade settlement, while Toss Bank has partnered with the Solana Foundation to examine stablecoin-based international remittances.

Unlike those initiatives, the Bank of Korea's deposit token program continues to operate through a CBDC-backed banking model that uses tokenized commercial bank deposits rather than privately issued stablecoins. With results from the 2026 program year expected to inform any broader rollout, the project's ability to demonstrate tangible cost savings for merchants and seamless consumer adoption will likely determine whether South Korea proceeds to full commercialization or returns to further piloting.