South Korea’s digital currency debate took a decisive turn when newly appointed Bank of Korea Governor Shin Hyun-song used his inaugural policy address to emphasize a future built around central bank digital currency (CBDC) and bank-issued deposit tokens, rather than privately issued stablecoins. The speech, delivered on April 21, offered one of the clearest signals yet that Seoul’s monetary authorities want the digital won to evolve within a tightly regulated, state-led framework.
The timing is notable. South Korea is still refining its broader digital asset rulebook through the pending Digital Asset Basic Act, and stablecoin regulation remains part of the national conversation. Against that backdrop, Shin’s decision not to mention won-denominated stablecoins in his first major speech as governor stood out immediately to observers and policy analysts.
A Two-Tier Digital Money Model
At the center of Shin’s framework is a two-layer architecture. Under this model, the Bank of Korea would issue a wholesale or hybrid CBDC, while commercial banks would distribute deposit tokens that are fully convertible and designed for everyday payments and settlements. In practical terms, this preserves the central bank’s role at the top of the monetary stack while giving regulated banks a key function in distribution and retail-facing innovation.
This structure leaves limited room for private issuers to dominate the core infrastructure of digital money. Rather than opening the system to a broad field of non-bank stablecoin providers, the framework prioritizes regulated institutions and interoperability with existing financial rails. It reflects a policy preference for continuity and oversight over experimentation led by the private sector.
That stance is particularly significant because Shin had previously appeared more open to coexistence between CBDCs, deposit tokens, and stablecoins. During his parliamentary confirmation hearing in mid-April, he said in written remarks that these instruments could coexist in ways that were both supplementary and competitive. He also suggested that if stablecoin issuance were permitted, it should begin with regulated banks. The sharper emphasis in his inaugural speech therefore suggests a deliberate policy narrowing once he formally assumed office.
Project Hangang Phase 2 Moves Into Real-World Testing
Shin highlighted Phase 2 of Project Hangang as the main vehicle for expanding the usability of the digital won. The project is the Bank of Korea’s flagship CBDC initiative, and its second phase launched in March 2026. It has since expanded to include nine major commercial banks, marking a shift from technical experimentation toward practical implementation.
Where Phase 1 focused mainly on blockchain-based testing of the digital won’s technical design, Phase 2 is aimed at applied use cases. These include programmable money functions, regulatory compliance tools, and integration with the country’s existing payments infrastructure. The emphasis is no longer simply whether a CBDC can work, but how it can be embedded into real economic activity.
One of the most important use cases under consideration is the disbursement of government subsidies. According to the material cited in the report, these applications could involve amounts of up to 110 trillion won, or roughly $73 billion. If implemented at scale, this would move the digital won beyond pilot status and into an area with direct public-policy relevance, including fiscal distribution and high-volume domestic payments.
That shift matters because large-scale subsidy use would test not only the technological reliability of the system but also its governance, traceability, and administrative efficiency. It would also offer policymakers a way to evaluate how programmable digital money might support targeted policy outcomes while remaining compatible with current banking structures.
International Ambitions Through BIS Collaboration
Shin also tied South Korea’s domestic digital money agenda to cross-border ambitions. In his speech, he referenced the Bank of Korea’s participation in Project Agora, an initiative led by the Bank for International Settlements (BIS). The project explores multi-CBDC platforms designed to improve the speed and efficiency of international payments and settlements.
For South Korea, participation in such a project serves more than a technical purpose. It aligns with the broader strategic objective of strengthening the role of the Korean won in global digital transactions without loosening capital controls or undermining financial stability. In that sense, the BOK appears to be pursuing a dual strategy: domestic modernization through CBDC and deposit tokens, and international relevance through regulated cross-border settlement experiments.
Shin’s own background helps explain that orientation. Before taking office as BOK governor, he served at the BIS from 2014 until early 2026, first as an economic adviser and later as head of the Monetary and Economic Department. His tenure overlapped with multiple collaborative CBDC experiments, including projects involving South Korea. That experience likely contributed to his preference for institutional coordination, central bank oversight, and internationally interoperable infrastructure.
Tighter Oversight of Crypto and Non-Bank Finance
Beyond the digital won itself, Shin’s speech laid out a broader regulatory agenda. He identified 24-hour foreign exchange trading, an offshore won settlement system, and stricter supervision of crypto markets and non-bank financial institutions as additional priorities. He also said the Bank of Korea would pursue a “cautious and flexible” monetary policy during his term.
The inclusion of tighter scrutiny over crypto and non-bank activity indicates that the central bank sees digital asset development and financial stability as closely linked. Shin pledged to improve access to data for risk monitoring and to strengthen oversight of activity taking place outside the traditional banking system. That suggests regulators are increasingly focused not just on innovation, but on visibility and control.
In policy terms, this matters because South Korea remains one of the world’s most active retail crypto markets. Any move by the central bank to increase surveillance, reporting standards, or institutional accountability could have meaningful consequences for exchanges, service providers, and the wider digital asset ecosystem.
Commercial Banks Stand to Benefit
Shin’s framework also carries important implications for the banking sector. By placing deposit tokens at the center of the digital money distribution layer, the policy effectively gives commercial banks a protected and strategic role in the next phase of financial infrastructure. Instead of being bypassed by a direct-to-consumer CBDC model or displaced by private stablecoin issuers, banks become the main channel through which programmable digital money reaches users and businesses.
This arrangement may prove attractive to policymakers because it balances innovation with institutional continuity. Banks already possess customer relationships, compliance capabilities, and operational infrastructure. Building deposit tokens on top of that base could reduce friction in adoption while keeping the central bank firmly in charge of the monetary core.
It also suggests that South Korea’s approach to digital currency commercialization will be conservative in design but ambitious in execution: regulated, interoperable, and closely integrated with the existing financial system rather than disruptive for its own sake.
A Clear State-First Signal
South Korea’s CBDC journey has now crossed from technical pilot work into a more policy-driven commercialization phase. Under former Governor Rhee Chang-yong, the Bank of Korea advanced technical testing and explored practical applications such as subsidy delivery. Under Shin Hyun-song, the messaging has become more explicit: the future of digital won infrastructure should be led by the state, implemented with banks, and kept within a strong regulatory perimeter.
The omission of private stablecoins from Shin’s first speech may not amount to an outright rejection, but it unmistakably shifts the center of gravity. For now, the Bank of Korea appears to be signaling that if digital money is to scale in South Korea, it will do so through CBDC and bank-issued deposit tokens, not through privately led alternatives.
As Project Hangang Phase 2 advances and the Digital Asset Basic Act moves closer to completion, South Korea is likely to become an increasingly important case study in how a major economy attempts to modernize money while preserving central bank authority and financial-system stability.