BOK pilots digital currency, but what is it like to use?

Signaling a new chapter in digital finance, the Bank of Korea last month launched “Project Han River,” a pilot program for its central bank digital currency, or CBDC. Running from April through June, the trial invites 100,000 individuals to test tokenized deposits, with roughly 60,000 participating as of Monday, according to the BOK.

The Korea Herald also took part to see how the system works in practice.

The first step involved opening a digital wallet through one of seven participating banks, KB Kookmin, Shinhan, Hana, Woori, NongHyup, IBK and BNK, via their mobile apps. After verifying a bank account and linking it to the wallet, users must transfer funds into the wallet, converting cash into tokenized deposits. Participants can hold up to 1 million won ($719) in digital tokens at a time.

Payments are currently accepted at a handful of merchants. This includes 7-Eleven, Kyobo Book Centre, Hanaro Mart and Ediya Coffee for in-store options and Hyundai Home Shopping and Ddangyo food delivery apps for online payments.

We tested the system at a 7-Eleven in Seoul. At checkout, we opened the banking app, tapped the wallet tab, entered a password, selected the QR payment option, entered the password again and scanned the code. Though similar to other contactless payments, the process involved noticeably more steps, with minor lags and interface delays making the experience feel clunky.

Online payments felt more intuitive, working much like other easy payment systems or digital wallets.

Overall, while the experience was comparable to existing mobile payments, tokenized deposits felt less preferable due to small but persistent technical hurdles that are hard to ignore in an era of near-seamless digital finance.

After the first phase ends in June, the BOK plans to conduct system maintenance before launching a second round of testing later this year. The next stage will introduce person-to-person transfers and expand the number of participating merchants.

So why launch a CBDC at all, especially when digital payment tools are already fast and widespread?

CBDCs are expected to benefit governments and the broader financial system more than individual users. Issued by the central bank, a CBDC is a digital version of cash built on blockchain. It is programmable and traceable, but unlike cryptocurrencies, it is fiat money: fully regulated and anchored to national stability.

By digitizing transactions, CBDCs can lower costs, streamline transfers and expand financial access. They also allow governments to distribute emergency and social benefits more directly, avoiding the delays of cash and the complexities of working with financial institutions.

For the central bank, the goal goes beyond convenience. The CBDC is seen as a way to future-proof the financial system by preserving access to sovereign money and reinforcing central bank authority in an increasingly digital world. Centralized oversight also boosts transparency and helps deter illicit activity.

Internationally, CBDCs could streamline cross-border payments and reduce reliance on private financial networks, supporting closer monetary cooperation.

Still, the idea is not without pushback. Critics warn that a traceable, state-issued currency could enable financial surveillance or restrict how money is used. Since the launch of the pilot project, petitions opposing CBDC adoption have drawn more than 50,000 signatures on the National Assembly’s public petition platform and have been submitted for parliamentary review.

A BOK official overseeing the project downplayed privacy concerns, emphasizing that the current trial involves a wholesale model for interbank use. Unlike a retail CBDC, where the central bank issues tokens directly to individuals, the wholesale version issues CBDC to commercial banks. The banks then provide users with deposit tokens, keeping individual transaction data out of the central bank’s reach.

“At this stage, the (central) Bank is focused solely on developing a wholesale CBDC system,” the official said. “Even if a general-use CBDC were to be introduced, it would require far more work and discussion, given the complexity and sensitivity involved.”

There are also concerns about systemic risk. A technical failure or cyberattack could disrupt the entire financial system, posing not only daily inconvenience but also national security threats.

Though CBDCs may take time to match the ease of today’s digital wallets, Korea’s pilot marks a key step toward digital currency — one that could reshape how money is stored, spent and distributed. Policymakers see it as a long-term upgrade to financial infrastructure and a potential shift in the nature of currency itself.

The program has also sparked debate among policymakers and academics over how to regulate emerging forms of currency — not only CBDCs, but also private digital assets such as stablecoins and cryptocurrencies. As these assets grow, governments face mounting pressure to update legal frameworks and build public consensus on the future of money.

The debate extends beyond Korea. While many countries are advancing CBDCs, the US has paused development, opting instead to back dollar-pegged stablecoins.

Still, the BOK has made clear it has no plans to eliminate physical cash.

“The reason we can use various digital payment methods with confidence is because we trust they’re backed by a centrally operated system, which allows conversion to cash at any time,” said BOK Deputy Governor Lee Jong-ryeol during a recent briefing. “Maintaining that trust in the currency system is a core responsibility of the Bank,” he added, noting there are “no plans to fully phase out physical cash.”

jwc@heraldcorp.com