South Korea is expanding its CBDC-based deposit token payment system nationwide, allowing more users and businesses to test blockchain-powered digital payments.
South Korea has taken another significant step toward the future of digital finance by launching the nationwide expansion of its CBDC-based deposit token payment initiative. The rollout marks the second phase of the country's "Project Hangang," a large-scale pilot designed to test how blockchain-powered deposit tokens can be used for everyday payments across a broader network of consumers, merchants, and financial institutions.
The expanded pilot is led by the Bank of Korea (BOK) in partnership with the Financial Services Commission (FSC) and nine participating commercial banks. Unlike a retail CBDC issued directly to consumers, the system uses a wholesale CBDC issued by the central bank while commercial banks issue tokenized bank deposits that customers can use for real-world transactions.
Project Hangang Enters Its Second Phase
The Financial Services Commission approved the second stage of Project Hangang on July 15, authorizing additional banks and expanding both the number of users and the range of supported payment services. The latest phase increases the maximum number of deposit token wallets from 100,000 to 500,000, broadens merchant participation, and introduces new payment capabilities beyond the first pilot.
Two additional banks Kyongnam Bank and iM Bank have joined the project, bringing participation to nine commercial banks. Existing participants include KB Kookmin Bank, Shinhan Bank, Woori Bank, Hana Bank, NH NongHyup Bank, Industrial Bank of Korea, and Busan Bank.
Authorities say the expansion will provide a more realistic environment to evaluate whether blockchain-based payment infrastructure can improve efficiency, reduce costs, and support broader digital financial services.
How the Deposit Token System Works
Under the pilot, the Bank of Korea issues a wholesale CBDC that serves as the settlement asset between financial institutions. Commercial banks then convert customer deposits into blockchain-based deposit tokens, which consumers can use to make payments through compatible digital wallets.
This two-tier model differs from a retail CBDC because consumers continue to interact primarily with their commercial banks rather than holding digital currency directly with the central bank.
The second phase also introduces several new features, including:
- Peer-to-peer token transfers.
- Automatic conversion between bank deposits and deposit tokens during payments.
- Higher wallet and transaction limits.
- Biometric authentication.
- Expanded merchant acceptance, including small businesses and larger commercial enterprises.
- Support for selected government payment programs.
These enhancements are intended to test whether deposit tokens can support everyday payments while maintaining the familiarity of traditional banking services.
Reducing Payment Costs for Merchants
Alongside the CBDC expansion, South Korea has launched a complementary blockchain payment infrastructure project aimed at lowering transaction costs for merchants.
The initiative, supported by the Ministry of Science and ICT and the Korea Internet & Security Agency (KISA), seeks to expand deposit token-based payment infrastructure that could reduce payment processing fees for small businesses while improving settlement efficiency.
Officials believe blockchain-based settlement could streamline payment processing by reducing reliance on multiple intermediaries.
Preparing for Live Transactions
The expanded pilot is expected to lead into live transaction testing later this year. According to recent reports, the second phase will begin real-world payment testing in September, allowing consumers to use tokenized deposits across participating banks for purchases, peer-to-peer transfers, and selected government disbursements.
The project represents one of the most advanced large-scale CBDC experiments among major economies, with South Korea continuing to evaluate whether deposit tokens could eventually complement existing payment systems.
The Bank of Korea has emphasized that it has not yet decided whether to issue a permanent retail CBDC, describing the current initiative as a research and testing program designed to assess technical performance, financial stability implications, and user adoption.
Global Implications for Digital Payments
South Korea's rollout comes as central banks worldwide continue exploring digital currencies and tokenized financial infrastructure. Rather than replacing commercial banks, the Korean model focuses on integrating blockchain technology into the existing banking system through tokenized deposits.
Industry observers view Project Hangang as a potential blueprint for future digital payment systems because it combines central bank settlement with commercial bank-issued deposit tokens, potentially preserving financial stability while modernizing payment infrastructure.
If successful, the pilot could influence how other countries approach CBDC implementation by demonstrating a practical model that supports instant digital payments without fundamentally changing the relationship between consumers and their banks.
Conclusion
South Korea's nationwide expansion of CBDC-based deposit token payments marks an important milestone in the country's digital finance strategy. By increasing participation to nine banks, expanding wallet availability to 500,000 users, and introducing real-world payment features, the second phase of Project Hangang significantly broadens the scope of blockchain-based payment testing.
While the initiative remains a pilot rather than a full CBDC launch, it highlights South Korea's commitment to exploring secure, efficient, and interoperable digital payment systems. The results of the expanded trial could help shape not only the country's future payment infrastructure but also broader international discussions about the role of CBDCs and tokenized bank deposits in the global financial system.
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