South Korea Tests CBDC-Backed Tokens for Public Spending

South Korea's Ministry of Science and ICT has launched a pilot program to test the use of CBDC-backed deposit tokens in public spending. The trial involves six major banks, including KB Kookmin, NH NongHyup, Shinhan, Woori, IBK Industrial Bank of Korea, and Hana Bank.

The banks will issue digital debt instruments that can be used by government officials for authorized expenses, such as institutional promotion costs and representation expenses. This is part of a larger effort to digitize public spending and reduce the use of traditional corporate plastics.

The trial is based on the technical framework of Project Hangang, which uses a two-layer control system. In this system, the central bank holds absolute control, while commercial banks act as intermediaries for the retail distribution of digital representations of conventional bank deposits managed on distributed ledgers.