South Korea’s Three-Month CBDC Trial: 100,000 People to Spend Digital Won

South Korea’s central bank, the Bank of Korea (BOK), is preparing for a major milestone in digital payments. Starting in April, the BOK will launch a three-month real-world trial of its central bank digital currency (CBDC). Known as the “Digital Test Project Hangang,” this initiative will allow around 100,000 participants to convert their traditional bank deposits into digital money, referred to as “deposit tokens.” These tokens can be used for purchases both online and offline at select merchants.

This large-scale experiment is designed to test the potential of creating a fully digital payment ecosystem. The goal is to explore whether the country’s current bank settlement system, which relies on central bank reserves, can be modernized with distributed ledger technology.

How the Pilot Will Work

The BOK has partnered with seven major financial institutions for this trial: KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, IBK Industrial Bank of Korea, and BNK Busan. These banks will issue deposit tokens backed by the BOK’s digital currency, allowing smooth transitions between traditional cash and digital assets.

Participants will have the ability to hold up to 1 million won (approximately $693) in these tokens. Over the three months, each participant can make transactions up to a cumulative limit of 5 million won. The transactions will be carried out through mobile banking apps, using QR code payments for convenience.

Merchants such as Hyundai Home Shopping, Ddangyo, 7-Eleven, Hanaro Mart, Kyobo Bookstore, Ediya Coffee, and Silla University will take part in the program, giving participants a wide range of options to spend their digital money.

Real-Time Settlements and Lower Transaction Fees

One of the key advantages of this pilot is the potential for real-time settlements. The BOK’s spokesperson pointed out that through deposit token payments, merchants can receive settlement funds immediately. This technology can reduce the transaction fee by reducing the number of intermediaries that are part of the payment process.

The BOK will promote public participation en masse by publishing an official statement in March. This invitation will help bring the general public into this digital experiment, allowing individuals and businesses to experience firsthand how digital currencies could shape future financial transactions.

Global Momentum Toward CBDCs

South Korea’s pilot is part of a larger global movement. According to the Atlantic Council: 134 countries, representing 98% of the world’s economy are exploring or developing their digital currency projects.

China has expanded its e-CNY pilot, and the European Central Bank (ECB) has started a multi-year digital euro pilot. Conversely, the Bank of England has not been enthusiastic about a digital pound. In America, President Donald Trump signed an executive order prohibiting federal agencies from issuing or pushing digital dollars.

Moreover, the Mbridge project, which includes nations like China, Thailand, the UAE, Hong Kong, and Saudi Arabia, has the objective of creating a platform for real-time cross-border CBDC transactions.

South Korea’s next pilot can be a model for electronic payment systems globally if it succeeds, with the potential to revolutionize its financial system in the next couple of years.