South Korea Advances Digital Won Implementation: CBDC Pilot Enters Second Phase, Government Subsidies Distributed for the First Time

Gate News, March 19 — The Bank of Korea officially launched the second phase of the “Han River Plan,” expanding the digital won pilot to nine commercial banks. For the first time, government subsidies were issued through deposit tokens linked to Central Bank Digital Currency (CBDC), marking a significant step in the application of digital currency in public finance.

This round of pilot includes two additional institutions on top of the original seven banks, focusing on government subsidy distribution and everyday payment transfer scenarios. Korean financial regulators are also participating in the process, testing consumer payments, peer-to-peer transfers, and fiscal distribution systems to verify the feasibility of blockchain payment infrastructure in real-world environments.

Compared to the first phase, this upgrade emphasizes improved user experience and system efficiency, including the introduction of biometric authentication, direct transfers between wallets, and automatic recharge mechanisms, making deposit tokens more similar in usage to existing electronic payment tools. The Bank of Korea aims to narrow the gap between technological pilots and practical applications.

Notably, government subsidies are being integrated into this system for the first time. Korea’s annual fiscal expenditure is substantial, and this move aims to reduce administrative costs, increase transparency in fund circulation, and minimize abuse risks associated with traditional distribution methods. Relevant departments are exploring the allocation of some fiscal budgets via blockchain architecture, which is seen as a crucial validation scenario for digital financial infrastructure.

Looking back at previous pilots, although nearly 100,000 participants were involved, actual usage and transaction volumes were relatively low, revealing that user acceptance and commercialization pathways still need improvement. Banks, after investing heavily in infrastructure, remain cautious about long-term returns.

The Bank of Korea emphasizes that this project is a transitional solution between CBDC and stablecoins, not an immediate launch of a comprehensive retail digital currency. It is a preparatory step for future institutional applications. According to the plan, a larger-scale test will begin in the second half of 2026, focusing on reducing payment costs and supporting emerging scenarios like AI-automated payments, gradually building the digital currency infrastructure for the next-generation financial system.