South Korea Accelerates CBDC Development with Tokenized Deposits in 2026

South Korea is preparing to launch the second phase of Project Hangang in September, a pilot initiative that will expand the use of tokenized bank deposits and test real-world applications such as P2P transfers, government subsidy payments, and retail transactions. The project aims to demonstrate how blockchain technology can be integrated into the financial system without replacing the role of commercial banks.

What is the second phase of Project Hangang?

South Korea continues to modernize its financial system through blockchain technology. The Bank of Korea (BOK) is in the final stage of preparing the second phase of Project Hangang, its central bank digital currency (CBDC) pilot program, which is scheduled to launch in September, provided that technical testing and participant onboarding are completed successfully.

Following the first phase, which primarily focused on validating the stability of the payment infrastructure, the project is now entering a much more ambitious stage. The goal is to evaluate how digital assets can be integrated into everyday financial activities by expanding both the number of participating financial institutions and the range of practical use cases.

Which banks will participate in the pilot?

During this phase, two additional regional banks—Kyongnam Bank and iM Bank—will join the initiative, bringing the total number of participating financial institutions to nine. This expansion will allow the system to be tested in a more diverse banking environment and provide more representative data for a potential large-scale rollout.

During this phase, two additional regional banks—Kyongnam Bank and iM Bank—will join the initiative, bringing the total number of participating financial institutions to nine.

What new features will tokenized deposits offer?

The main enhancements for users include peer-to-peer (P2P) transfers, biometric authentication, simplified registration procedures, and more efficient conversion between traditional bank deposits and tokenized deposits.

In addition, the program will expand the number of merchants where these digital assets can be used. This will allow the system to be tested under real market conditions while providing valuable insights into consumer and business behavior.

How will tokenized deposits be used for government subsidies?

One of the most innovative elements of the project will be the testing of government subsidy payments through tokenized bank deposits. Initially, authorities plan to apply this mechanism to support programs related to electric vehicle infrastructure and other public expenditures.

The key advantage of this model is that tokens can include programmable rules such as expiration dates, spending restrictions, or predefined usage conditions. As a result, the government could reduce fraud, improve the traceability of public funds, and automate part of the subsidy distribution process through blockchain technology.

Tokens can include programmable rules such as expiration dates, spending restrictions, or predefined usage conditions.

How does South Korea's hybrid CBDC model work?

Unlike some international projects exploring a retail CBDC for the general public, South Korea has chosen a hybrid model. The Bank of Korea will issue a wholesale CBDC exclusively for financial institutions, while commercial banks will issue tokenized deposits backed by customers' traditional bank deposits.

This approach preserves the role of the existing banking system while leveraging the advantages of tokenization. These include near-instant settlement, programmable payments, greater operational efficiency, and the ability to develop new financial services on blockchain infrastructure without fundamentally changing the current financial system.

What impact could Project Hangang have?

In recent years, South Korea has established itself as one of the world's most active countries in experimenting with regulated digital assets. The Bank of Korea is developing this project in cooperation with the country's leading financial institutions and regulatory authorities to assess not only its technological feasibility but also its economic and operational impact.

If the second phase proves successful, Project Hangang could become one of the world's most advanced examples of tokenized deposit implementation and serve as a benchmark for other central banks exploring digital currencies and blockchain-based payment systems.

As tokenization of financial assets gains momentum worldwide, South Korea's experience could accelerate the transition toward a financial model in which digital bank deposits coexist with traditional financial infrastructure, enabling faster payments, greater transparency, and new opportunities for the digital economy.