Bank of Korea tests tokenized reserves in cross-border payments exercise

The Bank of Korea has finished live cross-border payment trials using tokenized central bank reserves through the Bank for International Settlements-led Project Agora, processing transactions across six currencies and 17 payment scenarios.

The central bank took part in the latest round of Project Agora real transaction testing alongside 27 other central banks and private financial institutions, the Bank of Korea said. It confirmed that the platform's core functions and operating processes worked reliably in an environment designed to mirror real-world payment operations.

The exercise covered the Korean won, U.S. dollar, euro, British pound, Swiss franc and Japanese yen. South Korea's participating commercial banks included KB Kookmin Bank, NongHyup Bank, Shinhan Bank, Woori Bank and Hana Bank.

Participating institutions processed transactions worth about 800,000 Swiss francs across 17 payment scenarios, the central bank said.

The tests handled several cross-border payment use cases, including single- and dual-currency settlements between companies and banks, payment-versus-payment foreign exchange settlements and fund transfers within the same financial group, according to the Bank of Korea.

For its domestic test, the Bank of Korea worked with NongHyup Bank and Shinhan Bank to transfer 20 million won between the two lenders using tokenized reserve funds. The central bank said it received payment instructions from both banks before issuing, transferring and redeeming tokenized reserves on the Project Agora platform.

The process included a manual connection between Project Hangang, the Bank of Korea's wholesale central bank digital currency platform, and the central bank's existing financial network to validate interoperability during the transaction.

KB Kookmin Bank became the first South Korean commercial bank to complete a deposit token payment test with an overseas lender after conducting a yen-based settlement trial with Japan's MUFG Bank. The bank said the results would support its participation in future phases of Project Agora.

The Bank of Korea said additional live transaction tests would follow as the project expands to cover payment types and operational scenarios that were not included in the latest exercise.

The cross-border testing builds on South Korea's efforts to extend Project Hangang beyond institutional pilots and into commercial payment infrastructure.

The Ministry of Science and ICT and the Korea Internet & Security Agency launched a 9.6 billion won program earlier this month to connect Project Hangang with the country's existing payment network. The initiative is led by the Korea Financial Telecommunications and Clearings Institute and includes nine commercial banks, payment gateway providers and large merchants testing deposit token payments for everyday retail transactions.

Instead of replacing existing payment terminals, the project allows banks to issue deposit token wallets while merchants continue using current point-of-sale systems. Government agencies also plan to test deposit tokens for public-sector payments before integrating the technology with South Korea's digital public finance platform.

The Bank of Korea has consistently distinguished deposit tokens from stablecoins. Deposit tokens represent commercial bank deposits issued through a wholesale CBDC framework operated by the central bank. Stablecoins are separate digital assets backed by reserve assets under their own regulatory model.

The successful testing follows Governor Shin Hyun-song's digital finance agenda announced after he took office in April. In his inaugural speech, Shin said the Bank of Korea would continue expanding Project Hangang while participating in international initiatives such as Project Agora to strengthen cross-border payment infrastructure and support the Korean won in digital finance.

Although lawmakers have continued drafting stablecoin legislation under the proposed Digital Asset Basic Act, Shin's speech focused on wholesale CBDCs and tokenized bank deposits rather than privately issued stablecoins.

Shin's earlier work at the Bank for International Settlements argued that multiple privately issued stablecoins could fragment payment systems. Later reports indicated he had become more open to stablecoins operating alongside CBDCs under an appropriate framework.

While the central bank continues testing tokenized reserves and deposit tokens, lawmakers and financial regulators have been developing a separate legal framework for stablecoins.

The Financial Services Commission recently told the National Assembly that it intends to consolidate ten pending digital asset proposals into a single Digital Asset Basic Act covering stablecoin issuance, exchanges, disclosures and governance. The regulator has not published a final draft or announced a submission date.

A policy report published by Hashed Open Research and the Solana Policy Institute recommended introducing interim licensing guidance for won-backed stablecoins before the full legislation is completed. Participants at the June symposium cited in the report argued that temporary rules could help regulated businesses prepare for stablecoin issuance and payment services while lawmakers continue negotiating the final framework.

The Bank of Korea has maintained that banks should play a leading role in any future stablecoin model because of monetary policy, foreign exchange and financial stability considerations. Ownership rules for stablecoin issuers remain under discussion, with lawmakers and regulators continuing consultations before the proposed legislation moves forward.