A blockchain consortium operating in South Korea, in partnership with BNK Busan Bank, has completed a proof-of-concept for a blockchain-based payment and settlement system designed for digital local currencies. This trial marks a significant step toward modernizing public sector payments in the country.
The system tested the full payment cycle
Led by the K STAR consortium—which includes AhnLab Blockchain Company, OpenAsset, Kaia, and Lambda256—the pilot simulated the entire payment workflow on a blockchain platform. From issuing digital local currency to funding digital wallets, executing consumer payments, and completing business settlements, every phase was carried out in a blockchain environment.
According to K STAR, the system was put through its paces under various operating conditions, including periods of heavy network traffic and irregular transaction loads. The consortium reported that all simulated transactions were processed successfully, with payment completion times clocking in at under one second.
K STAR shared that the platform achieved a 100% transaction success rate during peak usage and high workload scenarios, and payments were finalized in less than one second.
Collaborative roles among institutions
Within the project, BNK Busan Bank developed the local currency model. AhnLab Blockchain Company oversaw the project’s design and spearheaded development of the digital wallet and settlement infrastructure. OpenAsset managed the issuance of stablecoins and asset consistency, while Kaia provided the blockchain network. Lambda256 was responsible for node infrastructure and transaction monitoring.
BNK Busan Bank, a well-known regional bank based in Busan, Korea, played a central role in integrating local payment scenarios with existing financial structures in the pilot.
Spending rules built directly into the digital currency
A distinctive feature of the new system is its ability to embed usage conditions directly into digital currency. The trial tested functionalities such as restricting funds to spend only at designated locations, setting expiration dates, and applying different settlement rules based on geographical area.
Mini glossary: “Settlement” refers to the process of finalizing a payment between parties. “CBDC” stands for central bank digital currency, a digital asset issued by central banks and considered an official component of the national monetary system, unlike private sector tokens.
The pilot demonstrated that features such as restricting where funds can be spent, adding expiration dates, and varying settlement rules by location operated as intended.
Wider applications under consideration
According to the consortium, this technology could be applied in the future to public aid programs, digital vouchers, central bank digital currency initiatives, or upcoming stable digital assets pegged to the Korean won.
In recent years, South Korea has been exploring the use of blockchain not only for cryptocurrency trading but also for everyday transactions. The Bank of Korea recently completed Project Han River, a pilot conducted with major commercial banks to test tokenized deposit accounts and wholesale CBDC models.
If this technology is adopted on a larger scale, it could simplify the issuance, tracking, and reimbursement processes of local currency programs. The structure promises to reduce administrative costs and mitigate the risk of misuse. For consumers, it would become possible to receive public subsidies or local spending vouchers directly into digital wallets, complete with predefined usage rules.
