The Bank of Korea has moved its Project Hangang digital-currency pilot into a phase that involves nine commercial banks and, for the first time, routes real government subsidies through bank-issued deposit tokens. The central bank confirmed the expansion this week, adding Kyongnam Bank and iM Bank to the seven institutions that ran the earlier trial.
The shift matters because it pushes a deposit-token model out of a closed sandbox and into actual public spending. Rather than issuing a retail central bank digital currency directly, Korea is testing tokens issued by commercial banks and settled on a wholesale CBDC layer run by the central bank.
A deposit token, not a retail CBDC
The design choice here is deliberate. Project Hangang uses won-pegged deposit tokens backed by central bank settlement infrastructure, not coins minted by the Bank of Korea itself. Kim Dong-sub, who heads the central bank's digital currency planning team, said banks are securing use cases with "high public relevance," including large businesses and small merchants, to show that the system can cut payment processing costs.
Seoul has been describing deposit tokens as an intermediate stage between a full CBDC and privately issued stablecoins. That framing addresses a live regulatory question in South Korea: who gets to issue won-pegged digital money, and under what supervision. By keeping issuance with licensed banks while anchoring settlement at the central bank, the pilot sidesteps the question of whether a private won stablecoin should exist at all, at least for now.
Government subsidies as the first real test
The headline change in this phase is the use of the tokens for state disbursements. The government plans to begin paying out subsidies in digital currency during the first half of this year, with electric vehicle charging infrastructure support named as an early application.
That is a meaningful step up from a consumer spending trial. Subsidy programs run on tight audit and eligibility rules, so routing them through programmable deposit tokens lets the state see where money goes and tie disbursement to specific conditions. It also gives the pilot a captive volume of transactions that does not depend on convincing shoppers to top up a test wallet.
Phase 1 struggled on exactly that point. The earlier trial leaned on voluntary retail use, and peer-to-peer transfers between users were difficult to execute. This phase adds P2P transfers between wallets, which removes one of the friction points that held back the first round.
The stakes for Korea's money rails
Korea is not alone in testing tokenized bank money, but routing live government payments through it puts the country ahead of most peers on practical deployment rather than research. If the subsidy disbursement works at scale, it gives the central bank a concrete argument for the deposit-token model over both a retail CBDC and an open market of private won stablecoins.
There is tension built into that position. Banks gain a role as token issuers, which protects their place in the payment system. Stablecoin proponents in Korea, including firms that want to issue won-backed tokens commercially, get squeezed if the state settles on bank-issued deposit tokens as the default. The pilot's success would effectively pick a winner in that contest.
For now the test is narrow: nine banks, a defined set of merchant and subsidy use cases, and a settlement layer the central bank controls. The result will shape whether Korea's digital won arrives as a bank product, a central bank product, or something the private market builds.
Overview
The Bank of Korea expanded Project Hangang to nine banks and began testing bank-issued deposit tokens for real government subsidy payments, starting with EV charging support. The model keeps token issuance with commercial banks while settling on a wholesale CBDC layer, positioning deposit tokens as a middle path between a retail CBDC and private stablecoins. Live state disbursement, plus new peer-to-peer transfers, marks the pilot's move from a consumer sandbox toward production use.
