The Bank of Korea (BOK) officially launched Phase 2 of its central bank digital currency (CBDC) pilot, Project Hangang, on March 18, 2026, expanding real-world testing of the digital won with broader banking participation and new programmable payment features.
Project Background and Phase 1 Results
Project Hangang adopts a hybrid model combining 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 from April to 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.
Phase 2 Enhancements: New Banks and New Features
Phase 2 widens the testing pool by adding BNK Kyongnam Bank and iM Bank, bringing total participation to nine commercial banks. Participating banks will integrate the system into their existing applications while covering their own development costs, with the central bank funding core infrastructure and consulting through October 2026.
New features introduced in Phase 2 include:
- Peer-to-peer transfers – enabling users to send digital won directly to each other.
- Biometric authentication (e.g., fingerprint login) for enhanced security and convenience.
- Automatic deposit conversion – when a user's digital wallet runs low, traditional deposits are automatically converted into tokenized balances.
Government Payment Integration: Subsidies and Smart Contracts
Phase 2 significantly expands programmable payments for public subsidies and vouchers. Notably, a pilot is being conducted in collaboration with the Ministry of Climate, Energy, and Environment to manage electric vehicle charging incentives. Smart contracts enable real-time fund tracking and automated compliance checks.
Officials are also testing broader treasury disbursements, allowing government payments to flow across multiple banks rather than relying on a limited set of intermediaries. This initiative aims to improve transparency and efficiency in distributing large-scale public funds.
Merchant Adoption and Cost Advantages
Merchant participation is expected to grow as both small businesses and large enterprises join the trial. Lower transaction fees compared with conventional payment systems and the potential for automated, programmable payments are key selling points.
Kim Dong-seop, head of the BOK's Digital Currency Planning Team, described 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. Deposit tokens can move freely across institutions, unlike many existing stablecoins."
Timeline and Commercialization Path
The Phase 2 timeline includes early subsidy pilots in the first half of 2026, followed by expanded real-world transaction testing in the second half of the year. The results will inform potential commercialization and regulatory adjustments. The central bank is also exploring long-term scenarios where a portion of national budget spending could be digitized.