- South Korea's Project Hangang enters second phase in September 2026 with nine banks, 500,000 users, and new features like biometrics and programmable subsidies.
- The first phase processed over 114,000 transactions but faced adoption challenges and a lack of independent security audit.
- A 2027 pilot will test tokenized government bonds settled via the Bank of Korea's wholesale CBDC, supported by new security token laws.
- The central bank also plans interoperability with external blockchains and is advancing stablecoin regulation.
South Korea is pushing forward with its central bank digital currency (CBDC) plans on two parallel tracks. The Bank of Korea is preparing to launch the second phase of its wholesale CBDC pilot, Project Hangang, as early as September 2026, while the government has set 2027 as the target for a tokenized government bond pilot that will use the same infrastructure. These initiatives reflect the country’s ambition to modernize its financial system using blockchain technology, but they also come with unresolved questions about security oversight and real-world adoption.
The second phase will expand the pilot to nine banks, raise the user cap to 500,000, and introduce features such as biometric authentication, person-to-person transfers, and programmable government subsidies. Meanwhile, the bond pilot aims to test the settlement of tokenized sovereign debt using wholesale CBDC, a move that the central bank governor has called the “grand prize” of tokenization. Both projects are backed by recent legislative changes that recognize distributed ledgers for securities registration and set the stage for a broader digital asset framework.
Project Hangang’s Second Phase: What’s New
The second phase of Project Hangang, scheduled to begin in September 2026, will add Gyeongnam Bank and iM Bank to the existing seven participants, bringing the total to nine. The user limit will jump from 100,000 to 500,000, and the individual wallet cap will rise from KRW 1 million to KRW 10 million. New capabilities include biometric login, auto top-up, and peer-to-peer transfers, which aim to make the system more convenient for everyday use. The pilot will also test the distribution of government subsidies through tokenized deposits, a feature that could streamline public spending.
The architecture remains the same: the Bank of Korea issues a wholesale CBDC as a settlement asset, while commercial banks issue tokenized deposits to consumers. This hybrid model, described by the central bank’s digital currency planning chief as a “middle ground between a CBDC and a stablecoin,” avoids direct central bank issuance to the public and preserves the role of commercial banks. Governor Shin Hyun-song, who took office in April 2026, has publicly backed the project and also committed to advancing cross-border tokenization through the BIS’s Project Agora.
First Phase Results and Security Concerns
The first phase of Project Hangang ran from April to June 2025 with seven banks, attracting about 81,000 users who completed 114,880 transactions across nearly 12,000 merchants. However, only 42% of the distributed funds were actually spent, indicating low adoption among participants. This shortfall likely motivated the new features aimed at reducing friction, such as auto top-up and integration with existing mobile banking apps.
A more serious concern emerged from regulatory documents: the pilot did not undergo an independent security audit after launch. The only formal evaluation occurred before the pilot started, in February 2025, when participating banks conducted internal reviews. The Bank of Korea argued that pre-launch checks were sufficient, but critics point out that a system handling real payments should have external oversight. The lack of a post-launch audit raises questions about transparency and public trust, especially as the project scales to half a million users.
The 2027 Tokenized Government Bond Pilot
On July 14, 2026, the Ministry of Economy and Finance included a tokenized government bond pilot in its second-half economic growth strategy. The plan calls for issuing and managing sovereign bonds on a blockchain linked to the Bank of Korea’s wholesale CBDC. The central bank will also study interoperability with external distributed ledgers, allowing the permissioned CBDC network to connect with other blockchain systems. The pilot is scheduled for 2027, aligning with the February 4, 2027, effective date of new security token amendments passed by the National Assembly in January 2026.
Bank of Korea Governor Hyun Song Shin presented a paper titled “A Unified Ledger in Practice: Lessons From Project Hangang” at the ECB Forum on Central Banking on July 1, 2026. He argued that government bonds are the ideal use case for tokenization because they serve as benchmark safe assets and key collateral in repo and central bank lending markets. Tokenizing them could improve collateral mobility, reduce reconciliation work, and enable automated margin calls and repo redemptions via smart contracts. However, the central bank also warned that faster settlement could transmit financial stress more quickly, requiring circuit breakers and liquidity backstops.
Regulatory Framework and Future Plans
The security token law amendments, passed on January 15, 2026, recognize distributed ledgers as valid systems for recording securities ownership and transactions. Security tokens remain legally classified as securities, subject to existing registration, disclosure, and licensing requirements. The Financial Services Commission will prepare subordinate rules before the February 2027 implementation date. This legal framework provides the foundation for the bond pilot and for broader tokenized securities markets>.
Beyond the bond pilot, the government is working on a Basic Digital Assets Act to regulate won-pegged stablecoins, allow spot crypto ETFs, and create rules for tokenized securities. Ten bills on digital assets and stablecoins are pending in the National Assembly. The government also plans to pilot tokenized bank deposits for public spending in Sejong city during the fourth quarter of 2026. These initiatives are part of a broader push to integrate blockchain into public finance, alongside investments in AI and semiconductor infrastructure.
The Bank of Korea’s preference for tokenized deposits over private stablecoins is clear. Governor Shin omitted any mention of stablecoins in his first official speech, signaling that the central bank sees regulated tokenized deposits as the safer path. Meanwhile, private sector experiments continue: Ripple and Kyobo Life Insurance settled what they called the first tokenized government bond in South Korea in April 2026, using Ripple’s blockchain for near-instant settlement.
South Korea’s CBDC journey is now entering a critical phase. The second phase of Project Hangang will test whether the system can handle a larger user base and more complex functions, while the 2027 bond pilot will explore the integration of wholesale CBDC with capital markets. The success of these projects will depend on addressing adoption gaps, ensuring robust security oversight, and building a regulatory environment that balances innovation with stability. The coming months will reveal whether the country can turn its ambitious plans into a working digital currency ecosystem.