The Bank of Korea has kicked off Phase 2 of Project Hangang, expanding its digital won pilot to nine banks and, for the first time, using CBDC-linked deposit tokens for real government subsidy payments.

The Bank of Korea (BOK) officially launched the second phase of Project Hangang on Wednesday, its flagship initiative to build a blockchain-based payments and settlement infrastructure using wholesale central bank digital currency (CBDC) and commercial bank deposit tokens. The expansion marks a pivotal step forward for South Korea’s digital currency ambitions, broadening the project from seven to nine participating commercial banks and introducing live government subsidy disbursement for the first time.

Phase 2, formally dubbed “Project Hangang Phase 2,” adds Kyongnam Bank and iM Bank to the original seven institutions — KB Kookmin, Shinhan, Woori, Hana, NH Nonghyup, IBK Industrial, and BNK Busan Bank. The project is being conducted jointly with the Financial Services Commission and the Financial Supervisory Service, and covers real-scenario testing of deposit tokens across two critical use cases: government subsidy distribution and nationwide consumer payment and transfer services.

Phase 1 of Project Hangang, which ran for approximately three months beginning in April 2025, onboarded up to 100,000 participants and recorded 118,000 payment test transactions, validating that a deposit-token-based payment and settlement system could operate stably in a live environment. However, the pilot exposed significant friction: while 100,000 citizens were invited to participate, only around 80,000 actually opened digital wallets, and total payment volume reached just 692.46 million won — modest figures that prompted banks, which had collectively spent approximately 30–35 billion won building the underlying infrastructure, to raise concerns about commercialisation viability.

The BOK has addressed those gaps directly in Phase 2. New features include biometric authentication via fingerprint for payment approval, direct peer-to-peer transfers between digital wallets, and an automatic top-up function that converts funds from a linked bank account into deposit tokens when a wallet balance runs low. The BOK framed the improvements as meaningful steps toward usability parity with existing electronic payment systems.

One of the most consequential additions in Phase 2 is the integration of government subsidy disbursement. South Korea’s government distributes vast sums through social welfare programs — a BOK representative has noted that Project Hangang is designed to enhance fiscal efficiency by reducing misuse and cutting administrative costs associated with the current system of credit cards, locally issued vouchers, and bank accounts. The government is exploring allocating a portion of its $499 billion budget via CBDC-linked distribution infrastructure, making the subsidy pilot a test case with implications well beyond retail payments.

The BOK was careful to frame the project’s ambitions modestly. In its announcement, it described the digital currency being tested as “an intermediate stage between a CBDC and stablecoins,” and emphasised that Project Hangang is not premised on the immediate introduction of a full retail CBDC, but rather a real-transaction test of how public financial infrastructure could function in a digital environment. For commercial banks, the BOK added, it would be “an opportunity to try using it in advance in preparation for the possibility of future institutionalization.”

Large-scale follow-up real transactions with all nine banks are planned for the second half of 2026, with a stated objective of reducing payment fees for small business owners and building financial infrastructure connected to new industries — including AI-based automatic payments. LG CNS, which built the underlying technical infrastructure for Phase 1, remains a core systems partner.

The launch comes weeks after the BOK separately published a report in February 2026 urging regulators to restrict early issuance of won-backed stablecoins to licensed commercial banks, citing money laundering and financial stability risks — a stance that reinforces Seoul’s preference for a controlled, bank-led path to digital currency adoption rather than the open-access model seen in some other jurisdictions.

The Federal Reserve’s Open Market Committee kept the federal funds target range unchanged at 3.5% to 3.75, signaling a wait-and-see stance as policymakers weigh the evolving macro backdrop and the geopolitical shock stemming from the Middle East. The decision preserves a restrictive stance while the central bank monitors inflation pressures and the economy’s ability to weather external shocks.

Fed Chair Jerome Powell framed the economy as performing well in broad terms — consumer spending staying resilient and business investment continuing to expand — but he warned that weaknesses linger in the housing market and the labor market shows signs of softening. Inflation, meanwhile, remains “somewhat elevated” relative to the 2% target, complicating the Fed’s path back to price stability.

The implications of events in the Middle East for the US economy are uncertain in the near term. Higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.

The posture underscores a difficult balancing act: the Fed must pursue maximum employment while keeping inflation anchored, all in a context where the war’s economic spillovers could push energy costs higher and alter demand dynamics. Powell’s remarks suggest policymakers view the near-term outlook as uncertain, with energy price trajectories among the wild cards that will shape policy in the months ahead.

Key takeaways

• Policy remains unchanged at 3.5% to 3.75%, with inflation lingering above the 2% goal and housing weakness alongside signs of labor-market cooling.
• Geopolitical tensions add energy-price risk, injecting additional uncertainty into the inflation path and the policy outlook.
• Markets broadly price in little near-term relief from rate cuts; CME data shows a 97% probability of no change at the next year-ahead horizon, with a small 3% chance of a 25-basis-point hike by April 2026 that would lift the range to 3.75%–4.00%.
• Industry commentary frames the gap between policy and liquidity flows: some observers expect potential easing if geopolitical strains intensify, while others see a gradual expansion of money supply lifting asset prices over time.

Policy stance amid a cloud of uncertainty

With inflation still stubbornly above target and a housing sector that has not fully recovered, the Fed’s decision to hold rates steady reinforces a cautious, data-driven posture. Powell emphasized that the economy’s breadth — including resilient consumer demand and ongoing investment — supports a patient approach to policy normalization. Yet he also acknowledged that the energy-price channel could complicate the inflation outlook if tensions in the Middle East persist or escalate.

The central bank’s balance between supporting employment and curbing inflation remains the defining tension of the moment. The war adds a layer of risk that policy makers must weigh against the need to avoid overtightening in an environment where consumer confidence and business sentiment can swing with energy headlines. In this context, the Fed’s forward guidance will be scrutinized for any signal about the pace and sequencing of future policy moves as new data arrive.

Market path and crypto implications

Traders have largely priced in a stationary policy path in the near term, with a long horizon view depending on how inflation evolves and how geopolitical risks unfold. Data from the Chicago Mercantile Exchange’s FedWatch tool indicated a dominant expectation for no near-term changes, reinforcing a narrative of policy steadiness in the face of uncertainty. The odds of a rate hike at the next specified horizon sit at a slim margin, while the probability of any cuts remains uncertain for the medium term.

Analysts have offered a spectrum of views on how policy could adapt if geopolitical tensions permanently alter the risk landscape. Some market observers, including Arthur Hayes, co-founder of BitMEX, have signaled a preference for lower rates before resuming bullish bets on bitcoin and other crypto assets. He has argued that a rate cut could bolster risk-taking and liquidity, potentially supporting crypto markets as capital seeks higher-yield opportunities.

On the other side of the debate, macro strategist Lyn Alden has described a scenario in which the Fed’s policy stance represents a gradual, ongoing expansion of monetary liquidity. In such a regime, asset prices, including digital assets, could receive support over time even without aggressive rate cuts, provided inflation remains contained and financial conditions remain accommodative enough to sustain broad-based investment activity.

For crypto investors and builders, the Fed’s decision underscores how sensitive risk assets remain to the direction of liquidity and the macro narrative around inflation and growth. A steady policy stance can reduce the impulsive volatility that often accompanies surprise shifts in rate expectations, but the ultimate crypto implication will hinge on how long inflation stays above target, how the labor market evolves, and how energy-price dynamics respond to geopolitical developments.

Beyond the immediate policy path, the relationship between Fed signals and risk assets suggests traders will monitor several ping points: incoming inflation prints, employment data, housing metrics, and evolving energy prices tied to Middle East developments. The crypto market’s sensitivity to liquidity conditions means any durable shift in the rate outlook could quickly reweight risk appetite across tokens, with capital potentially rotating between traditional risk assets and digital instruments tied to alternative financial rails.

As the central bank maintains a calibrated stance, investors should watch how policymakers view the trajectory of inflation in the wake of heightened geopolitical risk. A credible path back toward the 2% target—if energy-price pressures subside or are absorbed without a prolonged disruption—could reopen room for rate normalization. Conversely, persistent or rising inflation would keep policy more restrictive, with potential knock-on effects for both equities and crypto markets.

Looking ahead, the next round of economic data and any fresh guidance from policymakers will be pivotal. If energy prices stabilize and inflation moves closer to target, markets could begin pricing in a more confident glide path, potentially supporting broader risk-taking, including crypto ecosystems that rely on liquidity and favorable financing conditions.

In the meantime, traders and builders in the crypto space should remain attentive to shifts in liquidity and macro narrative. While the Fed’s decision to hold rates steadies some near-term risk, the ongoing Middle East situation remains a critical wildcard that could redefine the pace of policy normalization and, by extension, the appetite for risk across asset classes.

What comes next will hinge on incoming data, the resilience of consumer demand, and how energy markets absorb geopolitical developments. As investors recalibrate, the crypto sector will likely respond to evolving liquidity conditions and the broader assessment of risk appetite in a world where policy and geopolitics remain tightly interwoven.

After the US Securities and Exchange Commission (SEC) outlined four broad categories of digital assets that fall outside securities laws, Chair Paul Atkins offered further clarity on why nonfungible tokens (NFTs) generally do not meet that definition.

In a Wednesday interview with CNBC, Atkins reiterated that the agency’s recent interpretive release identified four types of digital assets that are typically not considered securities: digital commodities, digital tools, digital collectibles such as NFTs, and stablecoins.

During the interview, host Andrew Ross Sorkin pressed Atkins on digital collectibles, noting they could more easily resemble securities depending on how they are structured.

“Well, that’s true with anything,” Atkins replied, emphasizing that the SEC’s analysis still hinges on the facts and circumstances of each asset, particularly whether it involves an investment contract under longstanding legal precedent.

Atkins said digital collectibles are generally treated as items that are bought and held, similar to physical collectibles, rather than as investment contracts — the defining feature of securities.

“Some of these collectibles, like a baseball card, a meme or one of those memecoins, NFTs — those are something that somebody buys,” he said. “It’s an immutable purchase… it’s not something like another asset where people are trading it.”

Related: SEC chair Paul Atkins floats ‘safe harbor’ exemptions for crypto

SEC continues to move away from enforcement-led crypto policy

The securities regulator has recalibrated its approach to digital assets under Atkins, a shift that has coincided with the arrival of a more crypto-friendly Trump administration in early 2025.

“We’re breaking with the past,” Atkins said during the CNBC interview, describing the SEC’s push to provide clearer guidance and a more predictable regulatory framework for the digital asset sector.

Last year, Atkins criticized the agency’s previous reliance on “regulation through enforcement” and pledged to move away from that approach. He also pointed to tokenization as a key innovation that regulators should support rather than restrict.

He has since reiterated that past regulatory missteps have left the United States lagging behind in crypto development by as much as a decade, and has vowed to reverse that trend.

Related: CFTC issues ‘no-action’ letter for crypto wallet provider Phantom