Bank of Korea restarts second CBDC test…experiment reactivated amid delays in won stablecoin legislation

The Bank of Korea is accelerating efforts by resuming an experiment on a central bank digital currency (CBDC) that it had previously suspended. With discussions on institutionalizing won stablecoins delayed, the Bank of Korea has decided to move forward with restarting the second CBDC test, known as "Project Hangang."

According to industry sources on the 21st, the Bank of Korea recently sent official letters to major banks regarding the push for the second CBDC test. Specific experimental methods and the schedule have not been finalized, and discussions over the details are reportedly ongoing.

In this second test, a plan to pay part of government subsidies in the form of digital currency is being considered. The core goal is to check whether using a CBDC to restrict where funds can be used can reduce management and administrative costs that arise during subsidy disbursement.

Earlier, the Bank of Korea conducted a first CBDC experiment with seven banks for about three months starting in April, but subsequently suspended it temporarily. At that time, evaluations noted limited real-life usability, and there were criticisms that the structure, in which participating banks had to bear costs in the tens of billions of won, posed a burden.

A CBDC is a digital currency issued directly by a central bank and differs from privately issued fiat-backed stablecoins in terms of the issuing entity and role. Meanwhile, related legislation has been delayed as the Financial Services Commission and the Bank of Korea have been unable to narrow differences over the issuing entity and the regulatory framework surrounding the introduction of won stablecoins.