South Korea to test tokenized government bonds using CBDC infrastructure

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South Korea to test tokenized government bonds

South Korea to expand tokenization

The idea was first presented publicly on July 1 by Bank of Korea Governor Hyun Song Shin during a European Central Bank forum. He described government bonds as the main prize for tokenization and proposed bringing tokenized sovereign debt, wholesale central bank money and tokenized commercial bank deposits onto a unified ledger.

The system is expected to become an extension of Project Hangang, which is being developed under the leadership of the Bank of Korea. The bond pilot will form part of a broader government program aimed at developing a “blockchain economy.”

In the second half of 2026, authorities plan to introduce measures supporting large-scale pilot projects and the development of technologies for the digital asset and blockchain market.

The Bank of Korea has also warned that faster, round-the-clock settlement could accelerate the spread of stress across the financial system. The regulator has identified smart contract errors, liquidity shortages and problems with data oracles as additional risks. Moreover, Project Hangang’s digital ledger and the central bank’s existing payment system do not yet exchange data in real time.

Alongside the pilot, the government plans to introduce further measures to support the blockchain industry and the digital asset market, including legislation for crypto companies and stablecoin issuers.

The launch of the project is expected to coincide with the creation of a regulated tokenized securities market in South Korea. Amendments recognizing distributed ledgers as a legal method of recording securities are scheduled to take effect in February 2027. This will allow tokenized stocks, bonds and money-market instruments to be issued and traded in a regulated environment.

Why South Korea is interested in CBDCs

South Korea’s interest in CBDCs is primarily linked not to issuing digital money for the public, but to modernizing financial infrastructure. The Bank of Korea is developing an institutional CBDC for banks and other financial organizations so that it can be used to settle tokenized bonds, deposits and other assets. For a country with a large banking sector, a developed capital market and a strong technology industry, this offers a way to move securities issuance and settlement onto a unified digital ledger without giving private stablecoins the central role.

At the same time, CBDCs can be described as a global anti-trend only in relation to retail projects, which face privacy concerns, weak demand and risks to bank deposits. The situation is different in the wholesale segment. According to the BIS, 91% of surveyed central banks continued to explore CBDCs, while projects designed for financial institutions were more advanced than retail initiatives. South Korea is therefore not moving against the global trend, but following its more active direction: the use of tokenized central bank money for settlements between banks and in capital markets.

As previously reported, South Korean regulators and lawmakers agreed to introduce a 20% limit on the ownership stakes of major shareholders in cryptocurrency exchanges.

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