South Korea is advancing its central bank digital currency program with a nationwide expansion of deposit token-based payment testing, in one of the country’s most significant steps toward upgrading its digital payments infrastructure.

The Bank of Korea, in cooperation with the Financial Services Commission, is set to begin the second phase of Project Hangang in September. The expanded pilot will increase the number of participating commercial banks from seven to nine and extend access to more consumers and merchants across South Korea. The program is intended to test real-world payments using bank-issued deposit tokens that run on infrastructure supplied by the central bank.

Expanding Real-World Digital Payments

Project Hangang differs from a retail CBDC model in which consumers hold central bank digital currency directly. Under the pilot structure, participating commercial banks issue deposit tokens supported by wholesale central bank digital currency infrastructure, while continuing to manage customer-facing services and relationships. That design keeps banks at the center of retail payments while allowing the central bank to test settlement infrastructure for tokenized money.

Consumers will be able to use the tokens for everyday payments through participating banks. The second phase is expected to add several functions, including:

• Peer-to-peer transfers between users
• Biometric authentication for payments
• Automated deposit and withdrawal functions
• Broader merchant acceptance through participating banks
• Wider customer participation than in the initial pilot

Officials also plan to test programmable payments linked to government services, including subsidies for electric vehicle charging and selected public sector expenses. The blockchain-based structure is designed to allow authorities to define where and when certain funds may be used, with the aim of reducing misuse.

Building Toward Commercialization

The expanded pilot marks a major stage in South Korea’s wider digital currency strategy. Nine major banks are expected to take part: KB Kookmin, Shinhan, Hana, Woori, NH NongHyup, IBK, Busan Bank, Gyeongnam Bank, and iM Bank.

Authorities say the Bank of Korea will continue to provide the underlying wholesale CBDC infrastructure, while commercial banks issue and manage the customer-facing deposit tokens. The open-ended testing period is intended to help establish the technical and regulatory groundwork for possible commercialization of a digital won, including how tokenized deposits perform across bank systems, merchant payment flows, and consumer-facing authentication tools.

South Korea has placed the initiative within a broader set of digital asset reforms, including work on a regulatory framework for stablecoins and other blockchain-based financial services. The next phase will give regulators and banks more data on operational reliability, user access, merchant adoption, and compliance controls in a live payment environment. If successful, Project Hangang could become one of the world’s most advanced large-scale CBDC payment experiments and provide insights into how central banks and commercial lenders can jointly operate tokenized payment systems.