Bank of Korea Embraces CBDCs and Deposit Tokens: What It Means for the Future of Digital Money

The new governor of South Korea's central bank, Rhee Chang-yong, clearly demonstrated his backing for two forms of digital finance through his first public address: CBDC and deposit tokens. For an institution that has historically been slow to adopt any kind of cryptocurrency, it was an impressive way to start.

Rhee did not give a policy announcement. There was no announcement about when these things would be introduced or what their specifications would be. However, the excitement and focus on CBDCs indicated to the audience where the institution expected to be in the near future.

What He Actually Said

The governor is working on improving payment systems not only by using modern technologies such as Central Bank Digital Currency (CBDC) and deposit tokens, but also by creating a cutting-edge payment system that makes transactions more efficient by lowering costs, settling faster than before, and facilitating communication between banks.

Both CBDC and deposit tokens share very similar characteristics; however, CBDC has received more attention thus far. While deposit tokens can be used to facilitate many types of transactions without being tied to a specific airline, they do not have the same level of name recognition as CBDC does.

In addition to increased efficiency, the governor is establishing a central bank and a commercial bank working together to support the new modernized payment system. So instead of providing support for just one type of instrument, such as CBDC, the governor's plan includes developing both CBDC and deposit tokens as separate but equal systems of payment. The Bank of Korea outlined a bank-led model where the central bank issues a CBDC while commercial banks provide deposit tokens fully convertible into it — read the full inaugural address for primary confirmation.

Why South Korea Is Worth Watching

South Korea has definitely been quick to adopt technology. They have among the highest smartphone penetration rates in the world, a booming fintech industry and a population that is very comfortable using digital payment systems. South Korea reached a 5G smartphone penetration of 97.4% in Q3 2025 — the highest in the world — backed by Statista data. Kakao Pay, Naver Pay and Toss are common in most Korean households, with mobile banking being the norm rather than the exception.

Within all this, the cryptocurrency piece is more complicated than most people believe; however, there is still a very active market in South Korea for cryptocurrency. Traditional exchanges suffered their share of regulatory issues (i.e., the collapse of Terra/LUNA) with the majority of users being retail investors, but trading volume on crypto exchanges has continued to be high, and the South Korean government has created a more structured licensing environment for cryptocurrency.

From this perspective, the central bank's governor publicly endorsing creating central bank digital currencies (CBDCs) is not unexpected. What is unexpected is the timing and manner in which this endorsement was given, as it was not a defensive announcement made to address their ability to manage risk associated with cryptocurrency, but rather a forward-thinking endorsement of building a digital money system.

The Deposit Token Piece

The addition of deposit tokens is an exciting new development for people who want to track where global finance is going.

CBDCs always make headlines, but they also hold a huge political burden. For example, if a central bank could issue a digital currency to the general public, there would be concerns about the privacy of those transactions, removing banks from the equation entirely or governments tracking what people buy with their digital currency. This has led to a delay of CBDC retail implementation in multiple countries (such as the US) where there has been lots of political resistance.

Deposit token's ability to eliminate some of the political concerns is significant. Depositors will use commercial banks to hold and convert their deposit tokens, so the existing banking system structure remains intact; however, because of the programmability features associated with a deposit token, the following benefits will still flow from deposit tokens: smart contracts attached to deposit tokens, real-time settlement, and more efficient cross-border transactions.

From a regulatory perspective, deposit tokens are a good option for achieving the objectives of modernizing the existing systems while not disrupting them. According to the Bank of Korea governor, he specifically mentioned deposit tokens and did not default to using only CBDCs in his comments, suggesting that they have done their due diligence when considering how best to introduce digital currency into the existing financial infrastructures of the world. The Bank of Korea will expand CBDC and deposit token use through the second phase of Project Hangang, while also cooperating with Project Agora — a BIS-led cross-border tokenization initiative — to strengthen the Korean won's position in global payments. See Project Hangang details for proof of scope.

Where This Fits Globally

The Bank of Korea's actions are not occurring without reference to other central banks. The Bank for International Settlements has conducted several international tests using central bank digital currencies for several years. As of 2025, 137 countries and currency unions representing 98% of global GDP are exploring a CBDC, with 49 live pilot projects now active worldwide — tracked in real time at the Atlantic Council CBDC Tracker.

The European Central Bank is currently engaged in significant efforts to develop a digital euro. China has already launched its digital yuan in some of its cities and is expanding its use throughout China. As of June 2025, China's e-CNY has processed over $7.3 trillion in cumulative transactions and operates in more than 29 cities.

Joining this global momentum, with leadership in South Korea voicing their support for this direction, demonstrates that there is a growing global trend towards the creation and issuance of digital currencies by central banks. The question is no longer whether central banks will create and issue digital currencies, but rather what form they will take, and how quickly they will be created and issued.

Rhee's initial comments have advanced South Korea to a point of being much closer to the "sooner" than to the "later" timeframe in which digital currencies will be created or issued by central banks.

What It Means for Crypto Markets

For crypto investors and industry watchers, the practical impact of a CBDC announcement from Seoul is indirect but real. More digital currency infrastructure generally means more on-chain activity, more institutional familiarity with blockchain rails, and stronger pressure on private stablecoin issuers to meet higher regulatory standards.

It also validates the broader thesis that blockchain-based money is coming — not as a fringe experiment, but as a deliberate choice by mainstream financial institutions.

South Korea's governor said the quiet part out loud in his very first speech. That's not nothing.