Bank of Korea’s Digital Won Dilemma: Two Banks Join the Crypto Game

by

Finance

What to know:

  • The Bank of Korea, that paragon of fiscal prudence, has embarked on phase two of its digital won pilot, now enlisting nine commercial banks to test bank-issued deposit tokens for nationwide payments and government subsidies. One might say they’re chasing the elusive dream of a cashless utopia, though the word “elusive” is perhaps overused.
  • The new phase, a sly dance of digital finance, will trial large-scale, won-pegged deposit tokens built on a wholesale CBDC layer, aiming to slash transaction costs for corporations and small merchants-though one wonders if the latter will ever afford the luxury of such tokens, given their usual financial constraints.
  • The pilot advances as South Korea’s broader Digital Asset Basic Act languishes, delayed by disputes over who can issue KRW-pegged stablecoins. A tale as old as time: regulators debating who gets to play with the money, while the public waits, sipping tea and sighing.

The Bank of Korea and nine commercial lenders, ever the diligent alchemists of finance, began phase two of a digital won pilot, testing bank-issued deposit tokens backed by central bank infrastructure. The goal? To determine if the system can support government subsidy payments and consumer transfers nationwide. One might imagine the central bank’s economists hunched over charts, muttering about the “inevitability of progress.”

The second phase of Project Hangang adds two banks, Kyongnam Bank and iM Bank, to the program’s original seven. These institutions will now embark on large-scale testing of won-pegged deposit tokens built on a wholesale central bank digital currency (CBDC) layer, a whimsical framework that promises to revolutionize payments-or at least the perception of them.

“Participating banks are actively securing diverse use cases, such as large businesses and small merchants with high public relevance and significant payment fee burdens, focusing on the potential for drastically reduced fees when using digital currency for payments,” said Kim Dong-sub, whose name sounds like a character from a 19th-century novel, though his mission is decidedly modern. “Or perhaps, as the cynic might say, a desperate attempt to justify their existence.”

A key goal is to reduce the cost of transactions. By utilizing the deposit tokens, the BOK hopes to offer a lower-cost payment alternative for both large companies and small businesses-though one suspects the real beneficiaries will be the banks themselves, who’ve long since mastered the art of turning fees into a form of taxation.

The Phase 2 start comes as South Korea’s Digital Asset Basic Act, a sweeping framework meant to govern crypto trading and issuance, is delayed due to disagreements among regulators over stablecoin issuance. The thorniest issue centers on who should have the legal authority to issue KRW-pegged stablecoins-a debate as thrilling as a parliamentary committee meeting on tax policy.

In the new tests, peer-to-peer transfers, which were challenging in Phase 1, will become possible. A triumph of engineering, or perhaps just a clever rebranding of what was once called “banking.”

Kim also said, “The government aims to begin disbursing subsidies in digital currency during the first half of this year,” with electric vehicle charging infrastructure subsidies expected to be among the first use cases. One might imagine a future where even your Tesla’s charging station is a bureaucrat in disguise.

The Bank of Korea also mentioned plans to enable digital currency as a payment method for ‘AI agents,’ which are artificial intelligence systems that search for and purchase goods and services. A world where your toaster might one day demand payment in digital won, and you’d have no choice but to comply.

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2026-03-18 17:24