South Korean consortium completes won based digital currency pilot on Kaia

South Korean blockchain consortium has completed a proof of concept showing a blockchain-based digital local currency processing payments and settlements in under one second with a reported 100% transaction success rate.

According to South Korean news outlet Newsis, the K-STAR consortium and BNK Busan Bank have finished a proof of concept (PoC) to test whether a blockchain-powered digital version of South Korea’s local currency system could operate in a real banking environment. 

The trial covered the complete payment cycle, from issuing the 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. Within the project, BNK Busan Bank designed a policy-based local currency model based on the country’s existing regional currency framework while validating charging, payment, and settlement functions.

AhnLab Blockchain Company developed the project architecture, digital wallet, and transaction infrastructure, while OpenAsset managed stablecoin issuance and asset consistency. Kaia supplied the blockchain mainnet environment, and Lambda256 handled node operations and monitored transaction activity.

Policy controls embedded into digital money

Rather than testing simple blockchain transfers, the PoC focused on programmable digital money that could carry policy conditions. According to Newsis, the system allowed issuers to restrict spending to approved merchants, automatically expire unused balances after a predefined period, and apply different settlement rules depending on merchant categories.

Performance testing also formed part of the exercise. Using transaction loads modelled on BNK Busan Bank’s payment operations, the consortium evaluated the system under normal traffic, congestion, maximum 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 South Korean won-backed stablecoin applications.

Stablecoin development accelerates

The latest trial comes as South Korea’s financial sector continues expanding blockchain payment experiments ahead 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 followed President Lee Jae-myung’s June 29 pledge to allow companies to issue won-backed stablecoins, while several of the country’s largest banks also launched their own stablecoin collaboration.

The K-STAR consortium’s work also follows similar pilots across South Korea’s banking industry. In May this, KB Financial Group completed 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.