The Bank of Korea on March 18 launched Phase 2 of its digital won pilot, formally known as Project Han River, expanding the initiative from seven to nine commercial banks with the addition of Kyongnam Bank and iM Bank alongside existing participants KB Kookmin, Shinhan, Woori, Hana, NH Nonghyup, IBK Industrial, and BNK Busan.
The new phase represents a fundamental shift from the exploratory testing of Phase 1 to real-world deployment. For the first time, CBDC-linked deposit tokens will be used to distribute actual government subsidies to approximately 100,000 selected participants, moving beyond the simulated transactions that characterized earlier trials. The tokens are pegged to the won on a one-to-one basis and built on a wholesale CBDC settlement layer operated by the central bank.
Phase 1 had revealed significant engagement challenges. Of the 100,000 invited users, only around 80,000 opened wallets, and total transaction volume remained below 700 million won. To address these shortcomings, Phase 2 introduces biometric authentication, peer-to-peer wallet transfers, and automatic top-up functionality designed to create a more seamless user experience.
A central objective of the initiative is reducing payment processing costs for small business owners, who currently bear substantial credit card fees. The deposit token architecture bypasses traditional card network intermediaries, potentially offering merchants a lower-cost acceptance channel.
Perhaps most notable is the Bank of Korea's stated ambition to build financial infrastructure capable of supporting AI-driven automatic payments, positioning the digital won not merely as a digital substitute for cash but as a programmable payment rail for emerging commerce models. Large-scale live transactions across all nine participating banks are planned for the second half of 2026, with the central bank expected to make a final decision on whether to proceed toward a full retail CBDC issuance later this year.