South Korea Expands CBDC Pilot with Nine Banks and 500,000 Users

South Korea's Bank of Korea ran a central bank digital currency, or CBDC, pilot for three months last year. Eighty-one thousand people opened wallets, but only 42% actually spent anything.

The next phase of its CBDC push starts in September—with nine banks involved, up to 500,000 users spending the tokens, and real government money on the line this time.

The central bank announced the expansion of Project Hangang—its CBDC (a government-issued, blockchain-based version of the paper won) initiative—on Monday, per a Yonhap News Agency report. "From the second phase, we will lay the groundwork for commercialization," a Bank of Korea official told Yonhap.

Phase 1 ran from April to June 2025 with seven banks and 12,000 merchants producing 114,880 transactions. According to a review by the HRF CBDC tracker, banks had collectively put up around 30–35 billion won building the infrastructure for that result.

Phase 2 addresses the engagement problem with functionality that resembles actual banking. New features include biometric fingerprint approvals, person-to-person wallet transfers, automatic top-ups (your linked bank account converts funds into deposit tokens automatically when the balance runs low), recurring auto-payments, cash receipt generation, and interest payments.

For the first time, the pilot will also test government subsidy disbursements using programmable tokens.

The Bank of Korea issues a wholesale CBDC—a digital currency used only between financial institutions to settle transactions behind the scenes, not something ordinary people hold directly. Commercial banks then create deposit tokens (a blockchain-based version of the money already in your bank account) that consumers and merchants use for actual payments. Kim Dong-seop, head of the bank’s Digital Currency Planning Team, called the design "a middle ground between a CBDC and a stablecoin."

For regular users, that architecture could eventually mean receiving government benefits directly into a digital wallet instead of waiting for a voucher or a check. For small businesses and retailers, the test will measure whether deposit token payments can undercut the interchange fees that card networks charge on every transaction—a cost that compounds quickly for high-volume merchants.

Phase 2 will run programmable deposit tokens with spending rules baked in: funds locked to permitted purposes, vendors, and time windows, replacing the paper trail of manual audits and cutting fraud at the point of disbursement.

In other words, this implementation gives the Bank of Korea broader control into how citizens spend money given by the government for a specific purpose.

Joining the original seven banks—KB Kookmin, Shinhan, Hana, Woori, Nonghyup, Industrial Bank of Korea, and BNK Busan—are Gyeongnam Bank and iM Bank. The pilot will run open-ended rather than with a fixed close date.

South Korea's new Bank of Korea Governor, Shin Hyun-song, made Project Hangang a centerpiece of his first policy address after taking office in April 2026. Hana Bank, meanwhile, has started designing systems for a won-backed stablecoin—a privately issued digital token pegged 1:1 to the Korean won—ahead of legislation that has been at the center of a stablecoin debate in Seoul since mid-2025. The Ministry of Economy and Finance has also announced plans to update a 76-year-old national asset law to classify cryptocurrencies as national assets.

CBDCs, however, are not without controversy. The same programmability that makes deposit tokens attractive to regulators is exactly what worries critics. Rules that lock government funds to specific vendors can just as easily be extended beyond subsidies—expiring balances, spending category restrictions, or wallet freezes without a court order. Unlike cash, every CBDC transaction is logged on a ledger the central bank and its partners can read.

Civil liberties organizations have flagged this as a structural problem with CBDCs as a category, not just South Korea's version. China's digital yuan has already been rolled out with expiry dates on certain stimulus payments—Beijing frames it as anti-hoarding policy, critics call it financial coercion. Researchers at Lawfare have warned the e-CNY could set a global precedent for state-controlled financial surveillance. The concern is the same regardless of who's running the system: programmable money is money with conditions attached, and those conditions can always be expanded.