The Bank of Korea is stepping back into the digital currency arena, reigniting its central bank digital currency (CBDC) plans with a fresh strategy aimed at distributing government subsidies digitally. This move comes on the heels of a costly suspension of its initial pilot program, “Project Hangang,” and ongoing discussions around the regulation of won-backed stablecoins. But what does this mean for South Korea’s financial future?
The Initial Pilot: Project Hangang
Initiated in April 2025, Project Hangang was a bold experiment that allowed up to 100,000 participants to convert traditional bank deposits into digital tokens for an array of purchases. These tokens could be leveraged at notable retail partners such as 7-Eleven, Kyobo Bookstore, and Ediya Coffee, enticing users with offers like a 10% discount at 7-Eleven to encourage participation. The Bank of Korea (BOK) touted this project as a means to reduce transaction commissions for associated stores, ultimately benefiting both merchants and consumers.
During the trial, users faced a modest cap—converting up to 1 million won into digital tokens and spending a maximum of 5 million won. While the pilot was seen as a pivotal step towards a modernized payment system, it ultimately faced criticism for its limited practical value and lack of concrete future plans, leading to skepticism about its viability.
Suspension and Criticism
In June 2025, the BOK decided to halt the second phase of the CBDC testing, a move largely attributed to the staggering operational costs that accrued, reportedly reaching billions of won for the participating banks. Stakeholders criticized the decision, voicing concerns over the project’s unclear path to commercialization and its seemingly limited real-world usefulness. A Bank of Korea official noted:
“Details, including specific methods and timelines, are currently under discussion,”
highlighting the uncertainty that surrounded the pilot’s future.
The financial burden, coupled with ambiguous objectives, galvanized skepticism regarding the project’s potential benefits, paving the way for a strategic rethink from the BOK. This pivot was particularly relevant as the central bank sought to address the fundamental issues that led to the pilot’s premature suspension.
New Direction: Subsidies and Stablecoins
Shifting gears, the Bank of Korea is preparing for a new test phase, focusing on the digital distribution of government subsidies via its CBDC framework. Formal communication has already been sent to major banks, indicating readiness to explore this novel application of digital currency, which aims to streamline subsidy management and minimize administrative overhead costs.
Simultaneously, the South Korean government is advancing legislation to regulate won-backed stablecoins under the Digital Asset Basic Act. This regulatory approach may indicate a broader strategy to rechannel some focus away from a retail-centric CBDC towards establishing a robust framework for stablecoins, promising faster transactions and enhanced regulatory oversight. As the landscape evolves, participants are cautiously optimistic about the developments that lie ahead.
The Future of Digital Currency in South Korea
As the Bank of Korea gears up for its second round of CBDC testing, the insights gained from the initial pilot could prove invaluable. While the potential to use CBDC for government subsidies represents a pragmatic focus on utility, the success of this initiative hinges on how effectively it addresses previous challenges encountered during Project Hangang.
As digital currencies continue to gain traction globally, South Korea’s journey towards a fully integrated CBDC ecosystem will be closely watched, not only for its implications on domestic finance but for its influence on international standards. The evolving digital landscape promises to reshape the monetary fabric of the nation and could redefine how citizens engage with their finances.
Looking Ahead: A Digital Revolution in Payments
The revival of the Bank of Korea’s CBDC initiative signals a commitment to embracing digital transformation within the financial sector. With ambitions to enhance user convenience and regulatory clarity, the move towards digital subsidies is merely a stepping stone in a broader journey towards innovative financial solutions. As the debate around stablecoins intensifies and regulatory frameworks develop, the real test will be whether participants can leverage these new tools to invigorate everyday transactions and make public services more efficient.
