On March 18, 2026, the Bank of Korea (BOK) officially launched Phase 2 of its central bank digital currency (CBDC) pilot program, Project Hangang, expanding real-world testing of the digital won with broader banking participation and new programmable payment features.
Hybrid CBDC Model
Project Hangang employs a hybrid model that combines a wholesale CBDC (wCBDC) issued to financial institutions with blockchain-based deposit tokens distributed to consumers for everyday transactions. This design aims to bridge traditional banking infrastructure with programmable digital payments.
Phase 1, conducted between April and June 2025, involved seven major South Korean banks and tens of thousands of users. The pilot processed more than 114,000 transactions across participating merchants, including retail shops and online platforms, though adoption remained modest.
Key Innovations in Phase 2
Phase 2 adds BNK Kyongnam Bank and iM Bank, bringing total participating commercial banks to nine. The expansion is expected to support larger-scale transaction testing planned for the second half of 2026.
New features in Phase 2 include:
- Person-to-person transfers
- Biometric authentication (e.g., fingerprint login)
- Automatic conversion of traditional deposits into tokenized balances when digital wallets run low
- Programmable government payments tied to public subsidies and vouchers, including a pilot for electric vehicle charging incentives managed by the Ministry of Climate, Energy, and Environment. Smart contracts enable real-time fund tracking and automated compliance checks.
The pilot also expands treasury disbursements, allowing government payments to flow across multiple banks rather than relying on a limited set of intermediaries, improving transparency and efficiency in distributing large-scale public funds.
Merchant Participation and Cost Structure
Under Phase 2, banks will integrate the system into their existing applications while covering their own development costs. The central bank funds core infrastructure and consulting through October 2026. Merchant participation is expected to grow, with both small businesses and large enterprises joining the trial. Lower transaction fees compared with conventional payment systems and the potential for automated, programmable payments are positioned as key advantages.
Policy Perspective and Timeline
BOK officials describe the system as a practical compromise between centralized digital currencies and private stablecoins. “The system we are preparing under Project Hangang can be seen as a middle ground,” said Kim Dong-seop, head of the BOK’s Digital Currency Planning Team, noting that deposit tokens can move freely across institutions unlike many existing stablecoins.
The broader objective is to establish a low-cost, interoperable digital payment system while enabling new financial services, including tokenized assets and automated transactions. The central bank is also exploring long-term scenarios where a portion of national budget spending could be digitized.
The timeline for Phase 2 includes early subsidy pilots in the first half of 2026, followed by expanded real-world transaction testing in the second half of 2026. The results will inform potential commercialization and regulatory adjustments.