Bank apps to enable 'deposit token' transfers as real-transaction era comes into view

South Koreans could soon send deposit tokens through their banking apps and pay with a fingerprint, with the technology set to work at a wide range of merchants — from large businesses to small shops.

The Bank of Korea and commercial banks plan to launch Phase 2 real transactions under "Project Han River" in the second half of this year, according to financial industry sources Monday. Final pilot testing is underway, and some expect real transactions to begin as early as September.

Project Han River is an initiative in which the Bank of Korea issues a blockchain-based institutional (wholesale) CBDC, which commercial banks then use to issue deposit tokens. The goal is to verify how ordinary people use the tokens for actual payments.

During the Phase 1 real-transaction test conducted from April to June last year, about 81,000 electronic wallets participated and 114,880 transactions were made using deposit tokens — an average of 1.4 transactions per participant. Usage remained low due to a limited number of merchants and inadequate convenience features.

The Bank of Korea is focusing Phase 2 on verifying commercial viability.

The number of participating banks has grown from seven — KB Kookmin, Shinhan, Hana, Woori, NH NongHyup, IBK and Busan Bank — to nine, with Kyongnam Bank and iM Bank joining the program. The banks have also simplified the enrollment process and added features to improve user convenience, including peer-to-peer transfers, biometric authentication and automatic deposit token deposits and withdrawals.

In Phase 1, the Bank of Korea led efforts to secure representative merchants by industry. Starting in Phase 2, participating banks will also be able to add merchants with which they have signed MOUs. Unlike Phase 1, which ran for three months, Phase 2 has no set end date.

A separate project will use deposit tokens to disburse government subsidies. The first pilot involves the Ministry of Climate, Environment and Energy's subsidy program for electric vehicle charging facilities, which will partially replace conventional bank-account transfers to charging facility operators with deposit token payments.

Document screening for applicant operators was completed in late June. A selection committee will choose the operators shortly, after which operators will open deposit token wallets to receive their subsidies.

The Bank of Korea expects blockchain technology to prevent fraudulent claims by allowing restrictions on where, when and how the tokens can be used to be programmed in advance.

The initiative also includes a plan to pay public-sector operating expenses using deposit tokens. A pilot ministry is expected to be designated before the end of the year, following consultations with the Ministry of Economy and Finance.

The Ministry of Economy and Finance is also pushing a government bond tokenization pilot next year linked to the Bank of Korea's institutional CBDC. On July 14, the government announced through its "Second-Half Economic Growth Strategy" that it would pursue measures to strengthen industrial competitiveness in the blockchain and digital asset ecosystem in the second half of this year, and advance a government bond tokenization demonstration project tied to the Bank of Korea's CBDC next year.