South Korean central bank to start ‘Hangang’ CBDC pilot with 100,000 citizens next month: report

The Bank of Korea will hold trials for its CBDC project from April to June, according to a local media report.

This pilot, named "Hangang," is expected to involve 100,000 participants and seven major local banks, including KB Kookmin, Shinhan, Hana and Woori Bank. 

When the BOK issues pilot CBDCs, participants can convert their bank deposits into tokenized deposits to pay local vendors, including convenience stores, coffee shops, supermarkets and online shops.

Local news outlet JoongAng-Ilbo reported that mobile banking apps would make payments via QR payment functions.

With the experiment, the BOK plans to examine whether distributed ledger technology can replace the traditional settlement method of local banks that rely on central bank reserves.

A BOK representative reportedly said that tokenized deposit payments can minimize involvement of intermediaries in transactions and enable merchants to receive real-time settlements.

According to the report, the maximum number of deposit tokens an individual participant can hold is one million Korean won, which is about $689. Participants can top up their one million won deposit token limit to a total maximum of five million won. Participants will also be able to convert the tokenized bank deposits back into cash. 

The Block has reached out to the BOK for further comments on the CBDC trial.

While the South Korean central bank is forging ahead with its CBDC efforts, it recently announced that it has not considered creating a bitcoin reserve in its foreign exchange holdings. The BOK said that bitcoin does not satisfy IMF standards for such reserves. 

"However, we plan to closely monitor any future discussions, particularly those centered around the IMF, regarding the potential inclusion of virtual assets in foreign exchange reserves," a BOK representative told The Block via email.