South Korea’s main opposition party has come out against introducing a central bank digital currency until legal and institutional safeguards are in place.
The objection is about surveillance and control. But the program the Bank of Korea is actually running does not give consumers accounts at the central bank, and the restricted-spending features the party warns about appear only in specific public-voucher tests.
People Power Party leader Jang Dong-hyuk said on Facebook on Sept. 13 that he strongly opposes CBDC introduction until safeguards are perfectly established so the public can feel safe.
Privacy concerns rise
Jang acknowledged that CBDCs could make payments more convenient and efficient but said those benefits should not come before protections for users.
He questioned how extensively authorities could track citizens’ transactions and whether digital money could eventually be used to control where funds are spent or how long they remain usable. The party leader also raised the question of whether consumers would retain the ability to choose their preferred form of money if a CBDC were introduced.
Jang pointed to U.S. policy and Japan’s more cautious approach as examples of countries where retail CBDC issuance has faced limitations or has not moved directly toward a public launch.
Project Hangang Is Not a Retail CBDC
The distinction matters. Under Project Hangang, the central bank component operates at the wholesale level, while consumers use tokenized deposits issued by participating commercial banks.
Users in the first phase converted funds from their bank accounts into deposit tokens through banks’ mobile applications, then spent them at participating merchants, including via QR code. The tokens remain connected to commercial-bank deposits rather than becoming direct claims on the central bank.
The Bank of Korea has said the program was a pilot conducted through a financial regulatory sandbox rather than the launch of a national digital currency. The first public testing phase ran from April to June 2025 with seven banks—KB Kookmin, Shinhan, Woori, Hana, Industrial Bank of Korea, NongHyup, and Busan—and up to 100,000 adults.
The Second Phase
The Bank of Korea began the second phase of Project Hangang in 2026, expanding the participating banks from seven to nine with the addition of BNK Kyongnam Bank and iM Bank.
New functions include peer-to-peer transfers, biometric authentication, and automated movement between deposits and token wallets. Potential wallets rise from 100,000 to as many as 500,000. The central bank is also examining public-sector applications, including government subsidies, electric-vehicle charging support, and spending by government agencies.
Some of those tests involve programmable payments, where a voucher or subsidy can be restricted to a specific purpose under the rules of the relevant public program.
That feature provides context for Jang’s questions about whether digital money could eventually carry restrictions. But the Bank of Korea’s materials do not indicate that such conditions would automatically apply to ordinary deposit tokens or bank balances.
What the Central Bank Has Not Decided
The Bank of Korea continues to research broader CBDC infrastructure, including privacy technology and offline payment capabilities.
Bank of Korea Governor Shin Hyun-song has supported further work on CBDCs and deposit tokens as part of the central bank’s digital-payment strategy. His comments on Project Hangang’s second phase did not amount to a decision to launch a retail CBDC.
The central bank has also not set a deadline for issuing a general-purpose CBDC or announced plans to provide South Korean residents with direct accounts at the Bank of Korea.
That leaves Project Hangang primarily as a testing ground for how tokenized commercial-bank deposits, central-bank money, and programmable payments could operate within the existing financial system.
Opposition extends to digital assets
The People Power Party has separately challenged proposed major shareholder ownership limits under the planned Digital Asset Basic Act and called for cryptocurrency taxation to be suspended or removed.
In July, the Financial Services Commission proposed combining several pending crypto bills into a single framework covering stablecoin issuance, exchange rules, investor protection, disclosure requirements, and security standards.
Lawmakers also reviewed proposals in August that would require certain crypto influencers to disclose their digital asset holdings and payments, while considering stronger customer asset protections and changes to the one-exchange-one-bank rule.
The Bank of Korea is pursuing a separate track through Project Hangang, which is testing tokenized deposits and digital payment infrastructure. It has also supported a regulated approach to won-denominated stablecoins, with commercial-bank consortiums expected to play an initial role.
For now, Project Hangang remains a testing program rather than a decision to launch a retail CBDC. As the trials continue, policymakers will face questions over privacy, consumer choice, and the extent to which digital money should carry programmable controls before any broader adoption is considered.
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