The Bank of Korea is expanding its CBDC pilot to 500,000 users, introducing new features like biometric payments and government subsidies.
Overview
- The Bank of Korea's Phase 2 CBDC pilot will begin in September, involving nine banks and allowing 500,000 users to test live transactions.
- Phase 1 saw 114,880 transactions from 81,000 wallets between April and June 2025.
- New features in Phase 2 include biometric payments, peer-to-peer transfers, and government subsidy distributions.
The Bank of Korea is set to launch the second phase of its central bank digital currency (CBDC) pilot program this September, expanding participation to nine banks and potentially 500,000 users. This phase aims to enhance user engagement and will introduce live deposit token testing with actual government funds.
During the initial phase from April to June 2025, the pilot involved 81,000 individuals who created wallets, but only 42% utilized them for transactions, leading to a total of 114,880 transactions processed.
As part of the expansion, known as Project Hangang, the central bank's representative indicated that the upcoming phase will serve as a foundation for the commercialization of the digital currency. The initiative will also include features such as biometric fingerprint authentication, person-to-person transfers, automatic bank account top-ups, recurring payments, and interest accrual.
Additionally, for the first time, this phase will test the distribution of government subsidies through programmable tokens, which could streamline the process of transferring benefits directly into digital wallets.
The Bank of Korea's CBDC operates as a wholesale currency designed for interbank transactions, which commercial banks will convert into deposit tokens for consumer and business use. Kim Dong-seop, head of the Digital Currency Planning Team, described this approach as a hybrid between a CBDC and a stablecoin.
New banks joining the pilot include Gyeongnam Bank and iM Bank, alongside the original seven banks: KB Kookmin, Shinhan, Hana, Woori, Nonghyup, Industrial Bank of Korea, and BNK Busan. The pilot will proceed without a predetermined conclusion.
Shin Hyun-song, the Bank's new Governor, highlighted Project Hangang during his inaugural policy address. Meanwhile, Hana Bank is working on a stablecoin pegged to the Korean won, anticipating forthcoming legislation on stablecoins in Seoul, while the Ministry of Economy and Finance plans to revise national asset laws to include cryptocurrencies.
Despite the potential benefits of CBDCs, they are not without controversy. Critics raise concerns about the implications of programmability, including the potential for restrictions on government funds tied to specific vendors, which could lead to limitations on spending or account freezes. This raises civil liberties concerns, as transactions are recorded on a ledger accessible to the central bank.
In contrast, the U.S. recently enacted a four-year ban on CBDC issuance, highlighting differing approaches to digital currencies globally.
