[Phase 2 Crypto Act] BOK's 'Project Hangang' and BIS Agora: Integrating KRW Stablecoins as Real-Time Settlement Infrastructure and the Hybrid Regulatory Design
1. Introduction: The Critical Turning Point of Korea's Digital Asset Ecosystem in April 2026
As of April 26, 2026, South Korea's digital asset market stands at a historic crossroads, transitioning from a venue for speculative trading into a core component of the national financial settlement infrastructure. In the National Assembly's National Policy Committee, intense deliberations are underway regarding the "Phase 2 Crypto Act" (Digital Asset Basic Act), which seeks to legally define and integrate KRW-pegged stablecoins. Concurrently, the Bank of Korea (BOK) has officially launched Phase 2 of "Project Hangang," a major real-world trial of future monetary infrastructure.
The recent appointment of Shin Hyun-song as the new BOK Governor marks a pivotal shift in policy tone. Moving away from the conservative skepticism often seen during his tenure at the Bank for International Settlements (BIS), Governor Shin recently presented a forward-looking vision, stating that Central Bank Digital Currencies (CBDCs), deposit tokens, and private KRW stablecoins can "coexist complementarily and competitively" within the future monetary ecosystem. This paradigm shift signifies that KRW stablecoins are no longer viewed merely as auxiliary crypto assets, but are being elevated to the status of "real-time settlement infrastructure." This report provides an in-depth analysis of the hybrid regulatory design under the Phase 2 Crypto Act, the future of settlement networks proposed by Project Hangang and BIS Agorá, and the critical tax compliance implications as the 2027 crypto taxation deadline looms.
2. Legal and Regulatory Background: The Advent of the Phase 2 Crypto Act
The "Act on the Protection of Virtual Asset Users" (Phase 1), implemented in July 2024, served as a foundational safety net focused on market integrity—mandating the separation of customer deposits and strictly penalizing unfair trading practices. However, this legislation had obvious limitations; it did not address the vital infrastructural components such as token issuance, regulatory disclosures, or the overarching framework for stablecoin circulation.
The core objective of the pending Phase 2 Crypto Act is the institutional integration of KRW stablecoins. With USD-backed stablecoins already dominating global crypto liquidity and penetrating real-world payment sectors, there is a palpable sense of urgency among Korean policymakers that regulatory delays could result in a catastrophic loss of competitiveness for the domestic financial infrastructure. Democratic Party lawmakers Min Byung-duk and Lee Jung-moon have urgently called for the bill to be introduced to the subcommittee in April 2026, warning that "waiting endlessly for a government-drafted bill will cause us to miss out on the global industrial current." Upon passage, this Act will legally reposition KRW stablecoins out of the gray area between the Capital Markets Act and the Electronic Financial Transactions Act, recognizing them as legitimate real-time settlement and payment infrastructure.
3. Core Analysis: Hybrid Regulatory Design and the Evolution of Settlement Infrastructure
3.1 BOK's Project Hangang Phase 2 and Synergy with BIS Agorá
The BOK's "Project Hangang" Phase 2 is an expansive real-world trial running from April to June 2026. It involves up to 100,000 retail participants and 9 major commercial banks (including KB Kookmin, Shinhan, Woori, Hana, IBK, NH, BNK Busan, Kyongnam, and iM Bank). Leveraging a wholesale CBDC backbone, commercial banks issue deposit tokens which citizens are actively using for direct payments at offline franchises like 7-Eleven and Ediya Coffee, as well as online delivery platforms.
Furthermore, this second phase incorporates public treasury operations, testing whether digital KRW can effectively disburse government subsidies and manage fiscal operations. In parallel, the BOK is heavily involved in the BIS "Project Agorá" alongside five other reserve-currency central banks. Project Agorá aims to overcome the friction of cross-border payments by integrating tokenized commercial bank deposits and wholesale CBDCs on a Unified Ledger. This robust international cooperation ensures that Korea's digital currency ecosystem will interoperate seamlessly with global settlement networks.
3.2 The Korean Hybrid Stablecoin Model and the "51% Rule" Dispute
The most hotly contested regulatory debate within the Phase 2 Crypto Act revolves around issuance eligibility and ownership restrictions for KRW stablecoins. Some government factions argue that, to ensure consumer protection and systemic stability, only commercial banks should be permitted to issue digital money via deposit tokens. Conversely, momentum is building for a "Korean Hybrid Model" that allows banks, fintech firms, and crypto exchange consortiums to coexist and foster innovation.
At the center of this debate is the controversial "51% Rule." This proposed restriction would mandate that commercial banks hold at least a 51% controlling stake in any stablecoin-issuing consortium. While traditional financial regulators favor this for risk management, fintech advocates and progressive lawmakers strongly oppose it. Critics argue that the 51% rule is a regulatory convenience that stifles innovation. They assert that as long as strict guidelines—such as maintaining 100% fiat-equivalent reserve assets and robust liquidity management—are enforced, the market should be fully open to fintech issuers.
3.3 Crypto Taxation Chaos and the NTS Infrastructure Readiness
Another massive focal point in 2026 is the looming enforcement of crypto taxation. Originally slated for 2022, the amended Income Tax Act has been repeatedly delayed and is currently scheduled to take effect on January 1, 2027. Under the current law, income generated from the transfer or lending of virtual assets will be classified as "miscellaneous income," subject to a 22% tax rate (including local taxes) following a 2.5 million KRW basic deduction.
However, following the ultimate abolition of the Financial Investment Income Tax (FIIT) in late 2024, strong arguments regarding tax equity have surfaced. In March 2026, lawmakers from the ruling People Power Party, led by Rep. Song Eon-seok, introduced bills to either completely abolish or delay the crypto tax for another three years to align with the FIIT cancellation. Despite this political maneuvering, the National Tax Service (NTS) has nearly completed its comprehensive tax infrastructure, capable of collecting transaction data from both domestic and foreign exchanges by 2026. For stablecoins specifically, critical tax accounting hurdles remain unresolved: if a stablecoin is used purely for everyday payments, does the microscopic foreign exchange spread or conversion process trigger a capital gains event? Does it risk double taxation with Value Added Tax (VAT)? Clear guidelines are urgently needed.
4. Practical Guide: Strategic Responses for Investors and Institutions
4.1 Guidelines for Retail Investors and Tax Filers
While legislation to abolish the crypto tax remains pending, investors must pragmatically prepare for its scheduled implementation on January 1, 2027. According to Article 88 of the Enforcement Decree of the Income Tax Act, the acquisition cost for virtual assets held prior to January 1, 2027, will be recognized as the higher of the "actual acquisition cost" or the "market price as of December 31, 2026."
Therefore, investors are strongly advised to thoroughly document the market valuation of their portfolios at the end of 2026. For assets held on foreign exchanges or self-custodial wallets (including DeFi platforms) where historical data may be scarce, it is imperative to download and securely store comprehensive transaction histories to support First-In-First-Out (FIFO) or Moving Average cost calculations. It is crucial to remember that if the acquisition cost cannot be proven, the NTS will only allow a deemed expense deduction of up to 50% of the transfer value.
4.2 Infrastructure Audit for Corporations and Financial Institutions
Banks and fintech consortiums must accelerate their preparations to launch stablecoin businesses immediately upon the passage of the Phase 2 Crypto Act. Just as the United States is strictly regulating stablecoin issuers and mandating tax reporting via the IRS "1099-DA" form (guided by the Lummis-Gillibrand bill), Korean authorities will undoubtedly require 100% cash-equivalent reserves, bankruptcy remoteness, and regular Proof of Reserves (PoR) audits. Corporations must establish early partnerships with institutional custodians and deploy enterprise-grade accounting solutions capable of translating on-chain transactions into compliant ledger entries.
5. Outlook & Implications
The legislative sessions in May 2026 and the subsequent regular sessions in the latter half of the year will serve as the watershed moments defining Korea's digital asset regulatory framework. If the Phase 2 Crypto Act passes the National Assembly, the Financial Services Commission (FSC) is expected to release a comprehensive licensing manual for stablecoin issuance by year-end. This represents far more than mere crypto regulation; it is a national financial restructuring designed to upgrade the high-cost, legacy credit card and VAN networks into a low-cost, blockchain-based real-time settlement infrastructure.
Additionally, the fate of the crypto taxation—whether it will be delayed, abolished, or enforced—will be finalized in the second half of 2026. If the tax is enforced as scheduled, the market should brace for significant macroeconomic volatility toward the end of the year, including potential large-scale asset migrations or capital outflows to foreign jurisdictions as investors seek to optimize their tax liabilities.
6. Conclusion
The year 2026 is the foundational epoch for South Korea as it implants KRW stablecoins—a novel financial artery—into its national settlement infrastructure while establishing a sophisticated regulatory and taxation framework. The Bank of Korea's "Project Hangang" and the National Assembly's Phase 2 Crypto Act debates are no longer isolated blockchain industry topics; they are core economic mandates directly impacting traditional finance, tax authorities, and everyday consumers. Industry professionals and investors alike must proactively adapt to this emerging hybrid regulatory environment and the impending 2027 tax implementation to mitigate risks and seize the unprecedented opportunities of this financial innovation.