The South Korean blockchain consortium has completed a proof of concept showing a blockchain-based digital local currency processing payments and settlements in less than a second with a reported transaction success rate of 100%.
Summary
- K STAR and BNK Busan Bank have completed a blockchain-based digital local currency pilot project with a reported 100% transaction success rate and sub-second processing.
- The proof of concept tested a programmable currency that could limit spending, enforce expiration dates, and automate merchant settlements.
- The project adds to a growing list of stablecoin and digital currency pilots by South Korean banks as the country prepares new rules on digital assets.
According to South Korean media NewsThe K-STAR consortium and BNK Busan Bank have completed a proof of concept (PoC) to test whether a blockchain-powered digital version of South Korea’s local currency system could work in a real-world banking environment.
The trial covered the full payment cycle, from issuing currency and loading funds into digital wallets to customer payments and merchant settlements.
The consortium included BNK Busan Bank, AhnLab Blockchain Company, OpenAsset, Kaia and Lambda256. As part of the project, BNK Busan Bank designed a local currency model based on the country’s existing regional monetary framework while validating billing, payment and settlement functions.
AhnLab Blockchain Company developed the project architecture, digital wallet and transaction infrastructure, while OpenAsset managed the stablecoin issuance and asset consistency. Kaia provided the blockchain mainnet environment and Lambda256 managed node operations and monitored transaction activity.
Political controls built into digital currency
Rather than testing simple blockchain transfers, PoC focused on programmable digital currency that can have policy conditions attached to it. According to Newsthe system allowed issuers to limit spending to approved merchants, automatically expire unused balances after a predefined period, and apply different settlement rules based on merchant categories.
Performance testing was also part of the exercise. Using transaction loads modeled after BNK Busan Bank’s payment operations, the consortium evaluated the system under normal traffic, congestion, peak load and mixed irregular conditions, alongside continuous 24-hour operation. K-STAR said every transaction was completed successfully, while settlement processing remained below one second throughout the testing period.
The consortium said the same technology could later support government subsidies, digital vouchers, central bank digital currency (CBDC) services and stablecoin applications backed by the South Korean won.
Stablecoin development accelerates
The latest trial comes as South Korea’s financial sector continues to expand blockchain payment experiments in anticipation of new digital asset legislation.
Last year, Upbit operator Dunamu confirmed it would work with Naver Pay on a Korean won stablecoin initiative after Naver Pay announced it would lead an industry consortium developing the project.
The partnership follows President Lee Jae-myung’s June 29 pledge to allow companies to issue won-backed stablecoins, while several of the country’s largest banks have also launched their own stablecoin collaborations.
The K-STAR consortium’s work also follows similar pilot projects in the South Korean banking sector. Last May, KB Financial Group finalized a proof of concept for a won-denominated stablecoin that tested retail payments, merchant settlement, and cross-border remittances using Kaia and OpenAsset infrastructure.
Earlier in April, Shinhan Card partnered with the Solana Foundation to evaluate stablecoin payments on blockchain infrastructure, including non-custodial wallets and retail payment scenarios, as financial institutions prepared for the country’s evolving digital asset framework.
