Bank of Korea Launches Phase 2 of Digital Currency Project... EV Charging Infrastructure to Start in First Half

Bank of Korea Launches Phase 2 of "Project Hangang"

Pilot Government Fund Disbursement Project Begins in the First Half

Subsequent Real Transactions with Nine Commercial Banks in the Second Half

"Expanding Payment Locations and Enhancing User Convenience"

The Bank of Korea will officially introduce a digital currency system through Phase 2 of "Project Hangang." In the first half of this year, the government will first roll out a pilot project for the disbursement of government funds, specifically the Ministry of Climate, Energy and Environment's project to build electric vehicle charging infrastructure. In the second half, the Bank of Korea will conduct subsequent real transactions with nine major commercial banks.

The aim of Project Hangang is to build a digital currency infrastructure that enables the Bank of Korea and participating banks to issue and circulate institutional digital currencies and deposit tokens, thereby providing a payment method with lower fees compared to traditional systems. In addition, it seeks to realize innovative payment services by leveraging smart contracts and other digital technologies.

Seoul Jung-gu, Bank of Korea building. Bank of Korea

According to the Bank of Korea on March 18, Phase 2 of Project Hangang will expand the programming features, such as digital vouchers, compared to Phase 1. The first case of these programming features being applied in practice this year will be the Ministry of Climate, Energy and Environment's electric vehicle charging infrastructure project, which is a blockchain-based pilot project for government fund disbursement, and is scheduled to launch in the first half of the year. Building on this, the Bank of Korea plans to further apply institutional digital currency and deposit tokens to the pilot project for government fund disbursement and, in cooperation with banks, develop innovative services enhanced with programmable functions.

For the subsequent real transactions scheduled for the second half, the Bank of Korea will increase the number of participating banks and payment locations, as well as improve user convenience. A Bank of Korea official stated, "In addition to the initial seven participating banks (KB Kookmin, Shinhan, Woori, Hana, IBK, NongHyup, and Busan Bank), two more banks—Kyongnam Bank and IM Bank—have expressed their intention to participate." The official added, "Participating banks are actively working to expand the range of payment locations, focusing not only on large businesses with high relevance to public welfare and significant payment fee burdens, but also on small business owners, given that payment fees can be significantly reduced when using deposit tokens."

During the preparatory period, features to enhance user convenience were also developed, such as peer-to-peer transfers, biometric authentication, and automatic deposit and withdrawal for deposit tokens. A Bank of Korea official said, "Once these new features are implemented, it will be possible to safely transfer funds between individuals using deposit tokens, and users will be able to access deposit token services more easily through fingerprint authentication instead of repeatedly entering passwords." With the automatic deposit and withdrawal feature between deposits and deposit tokens, there will be no need to convert deposits into deposit tokens at each payment, even if the payment amount exceeds the available token balance. The official also stated, "The specific payment locations and whether new features will be applied will be announced sequentially after thorough discussions with the government, relevant agencies, and banks."

The Bank of Korea plans to ensure that digital currency and deposit tokens can function as payment methods for digital assets such as artificial intelligence (AI) agents and tokenized securities. A Bank of Korea official noted, "Last December, we verified that deposit tokens could be used as a payment method for services where AI searches for products and services and completes purchases (AI agents), according to user requests. Follow-up research will continue." The Bank of Korea also intends to continue research to enable the use of deposit tokens for trading digital assets, including tokenized bonds and stocks.

Meanwhile, in Phase 1 of Project Hangang, which ran from October 2023 to August of last year, the Bank of Korea verified whether digital currency and deposit tokens could operate smoothly throughout the entire process, including manufacturing, issuance, distribution, redemption, and disposal. A total of 81,000 participants (based on digital wallets) took part in the real transaction pilot conducted from April to June last year. The total number of transactions was 114,880, including payments at participating merchants and conversions between deposits and deposit tokens.

Through Project Hangang, the Bank of Korea aims to firmly establish digital currency and deposit tokens in the market, providing a universal low-cost payment method and innovative programmable financial services, while supporting the growth of the domestic digital asset ecosystem. A Bank of Korea official said, "By October this year, we will conduct consulting by external experts to objectively review regulatory improvement tasks, as well as system operation and advancement plans necessary for future commercialization."

This content was produced with the assistance of AI translation services.