The governor of the Bank of Korea, Hyun Song Shin, has laid out an ambitious plan to modernize the country's financial infrastructure by tokenizing government bonds and integrating them with a unified ledger for central bank digital currencies (CBDC) and commercial bank deposits. Speaking during a panel discussion at the European Central Bank (ECB) Forum on Central Banking in Sintra, Portugal, Shin praised tokenization for its ability to streamline the issuance and management of government debt, reduce errors, and enhance collateral verification processes.
“The big prize is tokenizing government bonds,” Shin said, emphasizing that tokenization makes it “much easier, much less prone to mistakes if you have everything tokenized.” His remarks come as the global market for tokenized real-world assets (RWAs) continues to expand, with US Treasury debt currently representing the largest segment at $14.6 billion, or approximately 46% of the $31.7 billion RWA market, according to data provider RWA.xyz.
The Bank of Korea governor detailed plans to bring tokenized government bonds, wholesale CBDCs, and tokenized commercial bank deposits onto a single unified ledger. This initiative is an extension of “Project Hangang,” a Bank of Korea-led pilot project that is already testing a blockchain-based wholesale CBDC system. The unified ledger concept aims to create a seamless, programmable financial ecosystem where different forms of digital money and assets can interact efficiently, reducing settlement risk and operational complexity.
Tokenized government bonds: benefits and global context
Shin’s vision is supported by a July 2025 report from the Bank for International Settlements (BIS), which found that government bond tokenization could improve market efficiency and spur financial innovation, provided that regulatory and infrastructure challenges are addressed. The report examined 39 tokenized bonds, including 24 issued by corporations and 15 by governments, and found “suggestive evidence” of lower bid-ask spreads, comparable issuance costs, and comparable yields compared to traditional non-tokenized bonds.
Government securities play a crucial role in the financial system, acting as a savings vehicle for households and firms and as collateral in a wide range of transactions. The BIS report noted that tokenization can enhance market efficiency by enabling the contingent execution of actions, reducing settlement risk, broadening investment access, and spurring the creation of new financial services. Tokenized bonds can be programmed with smart contracts to automate payments, coupon distributions, and maturity events, reducing the need for manual reconciliation.
The potential for tokenized government bonds extends beyond operational efficiency. By making debt instruments more accessible to a wider range of investors, tokenization could deepen liquidity in government bond markets, particularly for smaller issuers. This is especially relevant for South Korea, which has one of the largest government bond markets in Asia. The Korea Treasury Bond (KTB) market has seen growing foreign investment in recent years, and tokenization could further enhance its appeal by lowering entry barriers and improving transparency.
However, challenges remain. The BIS report cautioned that regulatory frameworks need to evolve to accommodate tokenized securities, including issues related to custody, settlement finality, and cross-border recognition. Additionally, infrastructure must be robust enough to handle high volumes of transactions while ensuring data privacy and security. The Bank of Korea’s Project Hangang is designed to address some of these challenges by testing a permissioned blockchain system that meets the performance and security requirements of a central bank.
Project Hangang and the unified ledger vision
Project Hangang, named after the Han River that flows through Seoul, was launched to explore the feasibility of a wholesale CBDC for interbank settlements. The pilot involves major Korean banks and uses a blockchain platform to simulate the issuance and transfer of digital tokens representing central bank reserves. By extending this project to include tokenized government bonds and commercial bank deposits, the Bank of Korea aims to create a comprehensive ecosystem for digital finance.
The unified ledger concept, as articulated by Shin, would allow for the seamless exchange of tokenized assets and digital currencies. For example, when a government bond is issued, it could be represented as a token on the same ledger where the wholesale CBDC is held. Settlement of bond purchases would occur atomically, reducing counterparty risk and eliminating the need for multiple clearing steps. Similarly, commercial bank deposits could be tokenized to enable instant payments and collateral movement.
This vision aligns with global trends. Several central banks, including the People's Bank of China, the European Central Bank, and the Bank of England, are exploring tokenized securities and wholesale CBDCs. The BIS Innovation Hub has been actively working on projects such as “Project Helvetia” and “Project Jura” that integrate CBDCs with tokenized assets. South Korea’s approach, however, is notable for its emphasis on unifying multiple forms of digital money and assets on a single ledger, which could serve as a model for other economies.
Hyun Song Shin: a central banker with a global perspective
Hyun Song Shin is a prominent economist who took office as the 33rd governor of the Bank of Korea in April 2025. Prior to his appointment, he served as the Economic Adviser and Head of Research at the Bank for International Settlements (BIS) from 2014 to 2024, where he oversaw the institution's analytical work on monetary policy, financial stability, and digital innovation. His tenure at the BIS included contributions to groundbreaking research on central bank digital currencies and the tokenization of assets.
Shin holds a PhD in economics from Stanford University and previously taught at Princeton University. He is known for his work on financial intermediation, global liquidity, and the interaction between monetary policy and financial stability. His appointment as Bank of Korea governor was widely seen as a signal that the central bank would prioritize innovation and digital transformation. Shin’s international experience and deep understanding of the BIS’s work on tokenization make his endorsement of the unified ledger particularly significant.
Under Shin’s leadership, the Bank of Korea has accelerated its digital currency projects. The central bank launched a research phase for a retail CBDC in 2021, but has since shifted focus to wholesale applications, including Project Hangang. The governor has emphasized that tokenized government bonds could be a “killer app” for blockchain in finance, offering tangible benefits over traditional systems. He has also stressed the need for collaboration with the private sector and international standard-setting bodies to ensure interoperability and regulatory clarity.
Market implications and future outlook
The potential adoption of tokenized government bonds by the Bank of Korea could have significant implications for the country’s financial markets. South Korea is home to a vibrant digital asset ecosystem, with major exchanges like Upbit and Bithumb trading billions of dollars in cryptocurrencies daily. However, the regulatory environment has been cautious, with strict rules governing security tokens and stablecoins. Shin’s vision could pave the way for a more integrated digital finance framework that bridges traditional capital markets with blockchain technology.
The global market for tokenized bonds is still nascent but growing rapidly. According to a report by the Greenwich Associates, the total value of tokenized securities could reach $24 trillion by 2027. Government bonds, as the most liquid and widely used collateral, are expected to be a major driver of this growth. The BIS report noted that while tokenized bonds currently represent a small fraction of the overall bond market, their advantages in terms of efficiency and accessibility could lead to widespread adoption in the medium term.
One area of particular interest is the impact on monetary policy implementation. Tokenized bonds could enable central banks to conduct open market operations more efficiently, with faster settlement and better tracking of securities. They could also facilitate the transmission of policy rates to the real economy by enabling more precise control over liquidity. For the Bank of Korea, which faces challenges related to low inflation and an aging population, innovative tools for monetary policy could be invaluable.
Privacy and security concerns must also be addressed. While blockchain offers transparency and immutability, it also raises questions about data privacy and the potential for illicit activities. The Bank of Korea has indicated that any unified ledger system would incorporate strict access controls and comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. The project is likely to be permissioned, limiting participation to authorized financial institutions and regulators.
The timeline for implementing Shin’s vision remains unclear. Project Hangang is expected to conclude its pilot phase by the end of 2026, after which the central bank will evaluate the results and determine next steps. A full-scale rollout of tokenized government bonds and a unified ledger would require legislative changes and coordination with the Financial Services Commission (FSC) and other government agencies. The Bank of Korea has signaled that it will proceed cautiously, learning from the experiences of other countries and ensuring that the system is resilient to shocks.
In the meantime, Shin’s remarks at the ECB Forum have drawn attention from the global financial community. They underscore a growing consensus among central bankers that tokenization is not a futuristic concept but a practical solution to long-standing inefficiencies in financial markets. As South Korea prepares to host the 2027 BIS Innovation Summit, the Bank of Korea’s initiatives are likely to be showcased as a leading example of digital central banking. For now, the world will watch as Hyun Song Shin and his team work to turn the vision of tokenized bonds and unified ledgers into reality.
Source:Cointelegraph News