South Korea Expands Deposit Token Plans With Banks and Sandbox Reforms

• The Bank of Korea plans to integrate deposit tokens more closely with banks’ account systems.
• Banks warn commercialization of deposit tokens will require significant operational investments.
• Sandbox reforms and digital-asset policy discussions expand South Korea’s fintech experimentation.

South Korea is expanding its digital-finance initiatives by integrating tokenized deposits more closely with the banking system while advancing regulatory reforms for emerging financial technologies. Recent developments span Project Hangang’s next phase, regulatory sandbox expansion, and broader discussions around digital asset oversight.

Bank of Korea Moves Token Tests Into Core Banking

According to a local media outlet, the Bank of Korea plans to connect its CBDC infrastructure with participating banks’ account-processing systems during Project Hangang’s second phase.

The change would move deposit tokens beyond separate pilot wallets and place them inside mobile applications, accounting systems, transaction records, and internal banking platforms.

According to the report, customers would use deposit tokens issued by commercial banks, while an institutional CBDC would settle transfers between participating lenders behind the scenes.

Banks are also developing wallets for programmable government subsidies, which could limit payments to approved recipients, merchants, or designated purposes. Nonetheless, the project is not an immediate retail CBDC launch.

In the meantime, it tests whether tokenized bank deposits can operate continuously within the existing financial infrastructure. That distinction is central to the model, as commercial banks would remain responsible for customer-facing money, while central bank money would support interbank settlement.

Commercialization Plans Raise Costs for Banks

Similarly, the Bank of Korea has increasingly presented Project Hangang as preparation for commercialization, rather than another limited technology demonstration.

According to reports, follow-up tests are expected to cover peer-to-peer transfers and wider financial services, alongside reviews of governance, legal risks, and potential operating models.

Participating banks have, however, warned that the expanded plan resembles the creation of a new financial business, requiring substantial operational changes. Those changes include stronger cybersecurity, anti-money-laundering controls, fraud monitoring, customer support, transaction reporting, and upgrades to core banking systems.

Banks have therefore requested a clearer roadmap and a more practical implementation schedule before deposit tokens move toward wider commercial use. Their concerns highlight that successful commercialization will depend not only on technical performance but also on operational readiness, regulatory clarity, and sustainable implementation costs. 

Sandbox Expansion Meets Global Enforcement Push

The Financial Services Commission plans to widen its regulatory sandbox to cover laws, including the Virtual Asset User Protection Act. The change would allow temporary exemptions for experimental services that cannot operate under existing requirements while remaining subject to regulatory supervision.

The FSC also intends to increase testing support, lower entry barriers for fintech firms, and accelerate permanent approvals for successful services. At the same time, Financial Intelligence Unit head Lee Hyung-joo has called for more consistent global licensing, supervision, and offshore exchange rules.

Speaking at the Financial Action Task Force plenary in Paris, Lee said uneven national standards allow firms to move toward weaker jurisdictions.

Together, these developments reflect South Korea’s broader efforts to modernize its digital-finance framework through banking innovation, regulatory experimentation, and evolving oversight of digital assets.

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