The Bank of Korea is carrying out the second phase this month of Project Hangang, a central bank digital currency (CBDC) trial that drew harsh reviews after last year's first experiment. As the Bank of Korea (BOK) decided to disburse 110 trillion won in national treasury subsidies through Hangang, many banks are showing interest.
According to the financial industry on the 17th, the Bank of Korea will announce the start of the second phase of Project Hangang on the 18th. In phase two, the BOK will expand CBDC use cases and broaden the scope of actual service application, and the commercial banks supporting this will increase by two from the existing seven (KB Kookmin, Shinhan, Woori, Hana, NH Nonghyup, IBK Industrial, BNK Busan).
Project Hangang is an initiative to digitize voucher distribution processes and verify payment efficiency by using deposit tokens (digital payment instruments) issued by banks based on CBDC. In phase one, there were many negative views. Banks spent a total of 30 billion won in expense to build infrastructure (base facilities), but among the 100,000 participants (citizens aged 19 or older) in the experiment, the number of electronic wallets actually opened was about 80,000, and the total payment amount was only 692.46 million won.
Because of insufficient promotion and a lack of incentives to use deposit tokens, the daily amount of deposit token use per participant fell short of 100 won. This fallout fueled distrust in the CBDC led by the Bank of Korea, and the second phase, which had been scheduled for Oct. last year, was temporarily postponed.
The Bank of Korea (BOK) decided to link the second phase to 110 trillion won in national treasury subsidies. If policy funds are paid in the form of deposit tokens on a Blockchain ledger, usage or limits can be restricted, and the expenditure details are disclosed transparently. While subsidies totaling 110 trillion won circulate in token form, the underlying cash is deposited in bank accounts, allowing banks to manage large sums.
They also expect that using a CBDC could save on interbank transaction fees and on expenses related to demand deposit accounts held at the Bank of Korea. Banks are also considering the possibility of using both CBDCs and stablecoins.
A commercial bank official said, "Working-level staff in charge of payment infrastructure do not expect overlap between the roles of stablecoins and CBDCs," adding, "Even if it incurs some expense, creating real use cases is necessary for new businesses."