South Korea Expands Deposit Token Pilot — A Third Path in Digital Money?

South Korea’s central bank is expanding its deposit token pilot under Project Hangang, advancing a potential alternative model for digital money that sits between central bank digital currencies (CBDCs), stablecoins, and traditional banking systems.

At its core, the initiative tests whether bank deposits can function as instant digital tokens—moving at crypto-like speed while remaining fully within regulated banking infrastructure. The expansion highlights a broader shift in global finance toward tokenized bank money rather than standalone digital currencies.

The Bank of Korea has entered Phase 2 of its deposit token pilot, expanding participation to around nine commercial banks under Project Hangang.

The system allows banks to issue digital tokens representing customer deposits, which can be used for payments and transfers across participating institutions.

The pilot is being tested in real-world conditions, including retail payments and merchant transactions. One major planned application is the distribution of approximately 110 trillion Korean won in government subsidies using the tokenized system.

Unlike crypto assets or stablecoins, these tokens remain fully backed bank liabilities and are issued under central bank oversight. The system is designed to integrate into existing payment infrastructure rather than replace commercial banks.

Deposit tokens are part of an emerging global trend toward tokenized bank money, where traditional deposits are represented digitally for faster settlement and improved interoperability.

Unlike decentralized crypto systems, issuance and settlement remain inside regulated financial institutions. Compared with card networks and clearing systems, the model reduces intermediaries and enables near real-time settlement between banks.

South Korea is among a growing group of advanced economies testing tokenized deposit systems as an alternative to retail CBDCs.

This pilot is a part of a wider structural shift in how money could work globally. Instead of creating a new central bank digital currency (CBDC), South Korea is testing a “third path” model: tokenizing existing bank deposits.

If scaled, the model could reduce dependence on traditional card networks and settlement layers while maintaining full regulatory control within the banking sector. It also positions commercial banks at the center of future digital payments infrastructure.

The model directly competes with stablecoins. It could reduce reliance on stablecoins in some payment use cases, as bank-issued tokens would be regulated, backed by commercial bank balance sheets, and integrated into government systems.

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