The Bank of Korea’s governor, Hyun Song Shin, has outlined a vision for tokenized government bonds and a unified ledger during a panel discussion at the European Central Bank (ECB) Forum on Central Banking in Sintra, Portugal. Speaking on Wednesday, Shin praised tokenization for its ability to simplify the issuance and management of government debt, calling it a significant step forward for financial infrastructure.
“The big prize is tokenizing government bonds,” Shin said, emphasizing that a tokenized system reduces errors and streamlines processes such as collateral verification, crediting asset provider accounts, and reversing transactions when necessary. His remarks come amid growing interest in real-world asset tokenization, with U.S. Treasury debt currently representing the largest segment, valued at $14.6 billion, or about 46% of the $31.7 billion tokenized RWA market, according to data provider RWA.xyz.
Project Hangang and the unified ledger
Shin also provided details on the Bank of Korea’s plans to extend Project Hangang, a blockchain-based wholesale central bank digital currency (CBDC) pilot. The extension envisions bringing together tokenized government bonds, wholesale CBDC, and tokenized commercial bank deposits onto a single unified ledger. This approach aims to enhance efficiency, reduce settlement risk, and create a more seamless financial ecosystem. The concept aligns with global trends where central banks are exploring digital currencies and tokenized assets to modernize payment and settlement systems.
The Bank of Korea has been actively researching CBDC technology since 2020, launching a pilot program in 2021 to test digital won functionalities. Project Hangang, named after the river that flows through Seoul, was initiated in 2023 to explore tokenized deposits and wholesale CBDC. The new unified ledger proposal represents a significant expansion of the project’s scope, potentially integrating multiple asset classes into a single programmable platform.
BIS report supports government bond tokenization
Shin’s remarks were echoed by a July 2025 report from the Bank for International Settlements (BIS), which examined the potential of government bond tokenization. The report analyzed 39 tokenized bonds, including 24 corporate and 15 government issuances, and found “suggestive evidence” of lower bid-ask spreads compared to conventional bonds, along with comparable issuance costs and yields. The BIS highlighted that tokenization could improve market efficiency, reduce settlement risk, broaden investment access, and spur financial innovation, provided that regulatory and infrastructure challenges are addressed.
Government securities play a crucial role in the financial system, serving as savings vehicles and collateral for transactions. Tokenization enables contingent execution of actions, enhancing market operations and paving the way for new financial services. The BIS report added that tokenized government bonds could accelerate the development of secondary markets and enable fractional ownership, making them accessible to a wider range of investors.
Global context and market impact
The push for tokenized bonds is part of a broader global trend. Central banks in countries such as Switzerland, Thailand, and Hong Kong have experimented with tokenized bonds and CBDCs. In Europe, the ECB has been exploring a digital euro and tokenized securities. The Bank of Korea’s initiative places South Korea at the forefront of this movement, leveraging its advanced technology infrastructure and regulatory sandboxes.
The tokenized bond market, though still nascent, is growing rapidly. According to RWA.xyz, the total tokenized real-world asset market exceeded $31.7 billion in mid-2026, with U.S. Treasuries dominating. Other assets such as corporate bonds, real estate, and commodities are also being tokenized. The BIS report noted that corporate bonds have seen more experimentation, but government bonds offer greater liquidity and systemic importance.
Shin emphasized that tokenization is not just a technological upgrade but a fundamental shift in how financial assets are created, traded, and settled. He highlighted the need for interoperability between different tokenized systems and the importance of robust cybersecurity and privacy protections. The Bank of Korea is working with commercial banks and technology partners to develop standards and protocols for the unified ledger.
Challenges and regulatory considerations
Despite the optimism, several challenges remain. Regulatory frameworks for tokenized assets vary widely across jurisdictions, posing barriers to cross-border integration. The Bank of Korea has called for international coordination to establish common standards for tokenized bonds and CBDCs. Additionally, infrastructure requirements such as scalable blockchain networks, secure custody solutions, and legal clarity on asset ownership need to be addressed.
The BIS report warned that tokenization could introduce new risks, including smart contract vulnerabilities, operational dependencies on validators, and potential fragmentation of liquidity. To mitigate these risks, central banks and regulators are advocating for controlled experimentation through pilot projects like Project Hangang. The Bank of Korea’s phased approach allows for testing in a sandbox environment before full-scale implementation.
Market participants have reacted positively to Shin’s remarks. Analysts at major investment banks noted that a unified ledger could reduce settlement times from days to seconds, lower costs, and enhance transparency. However, some caution that widespread adoption may take years due to the need for legal reforms and industry coordination.
Historical context: South Korea’s digital currency journey
South Korea has been a leader in digital finance, with a high rate of cryptocurrency adoption and a well-developed fintech ecosystem. The Bank of Korea initiated CBDC research in 2020, and by 2021, it had completed a pilot project simulating the issuance and circulation of a digital won. In 2023, Project Hangang was launched to test tokenized deposits and wholesale CBDC in collaboration with commercial banks. The current proposal marks the third phase, integrating tokenized government bonds into the system.
The governor’s background also provides context: Hyun Song Shin is a renowned economist who served as the economic adviser and head of research at the BIS before becoming Bank of Korea governor in 2024. His expertise in financial stability and innovation informs his approach to tokenization. During the ECB Forum panel, Shin shared the stage with ECB President Christine Lagarde and other central bankers, discussing the future of money and payments.
The ECB Forum, held annually in Sintra, brings together policymakers, academics, and financial leaders to debate pressing issues. This year’s theme focused on digital innovation and its implications for central banking. Shin’s presentation highlighted the potential of tokenization to reshape sovereign debt markets, a topic of keen interest amid rising government debt levels globally.
In summary, the Bank of Korea’s governor has articulated a clear vision for tokenized government bonds integrated with central bank digital currencies and commercial bank deposits on a unified ledger. Supported by BIS research and global trends, this approach could transform the efficiency and accessibility of government bond markets. However, regulatory and technical hurdles remain, requiring sustained cooperation between public and private sectors.
Source:Cointelegraph News