South Korea trials CBDC with 100,000 users

South Korea is set to launch a significant pilot program for its central bank digital currency (CBDC), known as Project Hangang, involving 100,000 participants and seven major banks.

The initiative, scheduled to run from April to June, aims to test the feasibility of CBDCs in real-world transactions, potentially revolutionising the country's payment systems.

Participants will be able to convert their traditional bank deposits into digital tokens, which can be used for purchases at various merchants, including 7-Eleven, Hyundai Home Shopping, and Kyobo Bookstore.

Transactions will be facilitated through mobile banking apps using QR code payments, with a maximum holding limit of 1 million Korean won (approximately $693) per participant and a cumulative transaction cap of 5 million won.

The Bank of Korea (BOK) and participating banks, such as KB Kookmin and Shinhan, will assess whether distributed ledger technology can replace traditional settlement methods, which rely heavily on central bank reserves.

This could lead to real-time settlements for merchants and reduced transaction fees by minimising intermediary roles.

"Through deposit token payments, merchants can receive settlement funds in real time. Additionally, related transaction fees are expected to be reduced by minimising intermediary institutions in the payment process," a BOK spokesperson noted.  

This pilot is part of a broader global trend, with many central banks exploring CBDCs.

South Korea's initiative could pave the way for a nationwide CBDC rollout, transforming its financial landscape and aligning with international efforts to integrate digital currencies into mainstream economies.