Major Korean commercial banks are actively seeking to participate in the Bank of Korea's second central bank digital currency (CBDC) test. The heightened interest comes as a pilot project to distribute over 100 trillion won in government subsidies via CBDC is scheduled for next year, with banks viewing it as a new growth opportunity.
According to financial industry sources on the 7th, major banks are incorporating budgets for participation in the BOK's second CBDC test, known as "Project Hangang," into their business plans for next year.
CBDC is a digital form of legal tender issued by central banks, often referred to as a "central bank version of stablecoin."
The first Project Hangang was designed so that the BOK would issue wholesale CBDC, commercial banks would then issue deposit tokens based on it, and consumers could experience digital payments in everyday life. However, bank participation was low due to cost concerns.
The atmosphere has shifted, however, as the BOK decided to pursue distributing government subsidies and vouchers in CBDC-based digital currency form as part of "Project Hangang Phase 2" in the first half of next year.
Banks are paying close attention to this pilot because government subsidies represent a substantial market. This year alone, 112.3 trillion won (16.7%) of the total national budget of 673.3 trillion won consists of government subsidies. A BOK official said regarding Project Hangang Phase 2, "We are preparing plans to utilize digital currency in various areas including government subsidy programs and peer-to-peer transfers."
