The Bank of Korea plans to use CBDC to pay $79.3 billion in government subsidies

On August 28, 2025, Bank of Korea (BOK) Governor Rhee Chang-yong announced at a press conference following a Monetary Policy Committee meeting in Seoul that South Korea plans to use central bank digital currency (CBDC) to pay out more than 110 trillion won (approximately $79.3 billion) in government subsidies. This initiative is part of South Korea’s “Han River Plan” CBDC pilot project, aiming to enhance the efficiency and transparency of fiscal policy. According to South Korea’s Hankyoreh, the plan was proposed by the Ministry of Strategy and Finance, marking the central bank’s restart of CBDC-related plans after previously suspending CBDC testing.

CBDC “Revival”: From Suspension to New Direction

Surprisingly, the Bank of Korea had announced the suspension of CBDC testing in June 2025, shifting its focus to stablecoin-based alternatives. However, the newly announced plan to use CBDC for government subsidy payments shows that South Korea has not completely abandoned CBDC development. Governor Rhee Chang-yong stated that this plan is part of the second phase of the “Han River Plan” pilot, aiming to improve the transparency and efficiency of fund management by paying subsidies via digital currency. He explained, “Paying subsidies with digital legal tender will help main contractors better manage funds when signing agreements with subcontractors.”

According to the plan, the Bank of Korea and the Ministry of Strategy and Finance will issue CBDC tokens to contractors, replacing traditional bank transfers or vouchers. Leveraging blockchain technology, the flow of these tokens can be tracked, effectively preventing fund misuse. Deputy Prime Minister and Minister of Strategy and Finance Koo Yun-cheol stated during a recent visit to the Bank of Korea that this move will significantly improve the efficiency and transparency of subsidy payments.

Cooperation with Banks: Favoring Institutions Supporting CBDC

Unlike the first CBDC pilot that ended in the first half of this year, the new round of pilots will be led by the private sector. The initial pilot mainly focused on commercial banks and their clients, but participating banks expressed dissatisfaction with the CBDC plan, citing excessive infrastructure investment costs. However, Rhee Chang-yong stated that the Bank of Korea is willing to cooperate with banks that are proactive about CBDC business. He noted, “Given the scale of the 110 trillion won project, I believe this is attractive to banks. We plan to prioritize cooperation with banks willing to invest.”

Accelerating Progress in Parallel with Stablecoin Legislation

Rhee Chang-yong also revealed that the Bank of Korea has not abandoned the CBDC plan due to its shift towards stablecoins. On the contrary, once the Korean legislature completes cryptocurrency and stablecoin-related legislation, the central bank will accelerate the “Han River Plan.” He said, “We have discussed the upcoming cryptocurrency and stablecoin legislation with the Ministry of Strategy and Finance and exchanged practical opinions with the Financial Services Commission. We hope the Bank of Korea’s views will be fully reflected in the legislative process.”

The Bank of Korea previously stated that it hopes to gradually promote CBDC and stablecoins through traditional financial institutions such as banks, which are strictly regulated by the central bank. However, leaders in Korea’s financial and cryptocurrency sectors have expressed dissatisfaction with the slow progress of stablecoin legislation. Currently, lawmakers are divided on whether to allow tech companies to issue won-pegged stablecoins. Conservatives advocate restricting issuance rights to commercial banks to ensure financial stability, while progressives believe this could stifle innovation.

The Bank of Korea’s plan to use CBDC for government subsidy payments not only marks a significant shift in its digital currency strategy but also reflects its efforts to balance financial innovation and regulation. By leveraging blockchain technology to enhance the transparency and efficiency of subsidy payments, South Korea is seeking to secure a place in the global development of CBDCs. However, controversies over stablecoin legislation and banks’ willingness to participate remain key factors affecting the progress of this plan. In the future, with improved legislation and deeper pilots, South Korea’s digital currency ecosystem is expected to embrace new development opportunities.

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