The Bank of Korea is ramping up Project Hangang once again. Starting in September 2026, South Korea’s central bank is launching the second phase of its Central Bank Digital Currency (CBDC) pilot, targeting 500,000 users. That figure marks a massive expansion from the first phase, which involved just 81,000 users in mid-2025. Under the leadership of new Governor Shin Hyun-song, the project has taken center stage as a key policy initiative since April.
The initial phase involved seven banks and 12,000 merchants, recording 114,880 transactions with collective banking infrastructure costs surpassing 35 billion won. However, only 42% of participants actually spent their tokens. Learning from that outcome, the second phase launches with no fixed end date. Nine banks are now taking part, including new additions Gyeongnam Bank and iM Bank.
New features on offer include fingerprint biometric authentication, P2P transfers, auto-reload capabilities, and interest payments. The network architecture positions the Bank of Korea as the issuer of wholesale CBDCs for interbank settlements, while commercial banks issue deposit tokens for consumer use - a model frequently described as a middle ground between CBDCs and stablecoins.
Conditional Subsidies
The primary breakthrough in this second phase is the distribution of government subsidies. For the first time, welfare funds are being distributed using programmable tokens. This means subsidy funds are strictly locked to designated purposes, specific vendors, and set timeframes.
This conditional money model has sparked fierce criticism over its potential to enable spending controls. Token balances can be programmed to expire if left unused, purchase categories restricted, and wallets frozen without a court order. Every transaction is also permanently recorded on a ledger visible to the central bank. As a global precedent, China has already applied expiration limits to its digital yuan stimulus payouts.
Two Diverging Paths
Beyond the public sector, Hana Bank has begun developing a 1:1 won-pegged stablecoin system. This private initiative runs parallel to legislative debates that have been ongoing since mid-2025. South Korea’s Ministry of Economy and Finance is also planning amendments to a 76-year-old law to formally classify crypto as national assets.
While South Korea pushes ahead with adoption, the United States is moving in the opposite direction. A four-year ban on CBDC issuance in the US recently took effect on July 11, 2026. For 500,000 South Koreans this September, their digital wallets represent a thin line between welfare distribution efficiency and comprehensive state surveillance.
Reported by Decrypt.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
