The Bank of Korea is steadily progressing with its digital won experiment. Building on the success of the initial "Project Hangang," which involved seven commercial banks and capped at 100,000 users, the project is now set to enter an expanded Phase 2. While official confirmation on the exact launch date and scope of the next phase remains limited, it is expected to introduce more banking partners.
Significance of the Digital Won Phase 2 Pilot
The transition to Phase 2 signals the Bank of Korea's optimism regarding the outcomes of its preliminary trials and its decision to deepen the testing. The first phase primarily focused on building core infrastructure and conducting controlled experiments with a limited user base. Phase 2 typically involves exploring a broader range of transaction scenarios, onboarding more participants, and conducting stress tests under conditions closer to real-world operations.
The Bank of Korea has consistently emphasized that it has not yet decided whether to ultimately issue a central bank digital currency (CBDC). Official documents frame the entire pilot project as research into future monetary infrastructure rather than a commitment to launching a digital won for public use.
This distinction is crucial. Central banks globally have undertaken multi-phase pilot projects that did not result in full deployment. Therefore, the digital won pilot should be understood as a structured research experiment, not a product launch.
How Increased Bank Participation Changes the Landscape
Incorporating more banks into a CBDC pilot can significantly expand the breadth of its testing. In most CBDC designs, commercial banks play a critical role at the distribution layer, handling deposits, managing digital wallets, and settling retail transactions. Introducing additional banks means the pilot will be tested in a more diverse operational environment and across a wider range of customer segments.
The first phase already included South Korea's major commercial banks, encompassing the four largest and regional players like Busan Bank. If two more financial institutions join for Phase 2, it would make the pilot project a more comprehensive representation of the domestic banking ecosystem.
Digital Won Pilot Amidst Evolving Policy Landscape
The digital won pilot is central to broader policy discussions in South Korea. As the Bank of Korea tests a central bank-issued digital currency, private sector participants and lawmakers have also turned their attention to won-denominated stablecoins, viewing them as a potentially faster route to payment modernization.
The stablecoin discourse adds complexity to the timeline for a digital won CBDC. Banks and industry groups have begun exploring plans for issuing private stablecoins, raising questions about whether a government-issued digital won would need to coexist or compete with commercial alternatives.
Bank of Korea Governor Rhee Chang-yong previously indicated plans to advance Phase 2 of the pilot by 2026, representing the latest positive signal from official channels. However, whether the pilot proceeds on schedule or faces further delays due to stablecoin policy considerations will depend on how South Korean regulators balance innovation speed, infrastructure costs, and the competitive landscape.