The Bank of Korea intends to launch a pilot program for its retail central bank digital currency (CBDC).
The start of the mentioned initiative in test mode is scheduled for the fourth quarter of next year. Media reports that 100,000 South Korean citizens who will be pre-selected will participate in this digital currency testing program. These individuals will be able to use tokens in the form of CBDC, which will be issued by commercial financial institutions.
The program, which will be launched in the fourth quarter of 2024, is designed to address the challenges faced by existing voucher systems in the specified country. South Korea’s financial regulator, according to media reports, is currently actively involved in the process of exploring new types of products in sphere banking and related areas and is interested in implementing initiatives aimed at improving the efficiency of transactions made by individuals and legal entities daily.
The Bank of Korea has been working on CBDC pilot projects since 2020. In 2021 and 2022, the financial regulator conducted two stages of testing its retail digital currency. Pilot initiatives have also been implemented in partnership with the Korea Financial Telecommunications & Clearings Institute (KFTC) and 14 commercial lenders.
Besides, the Bank of Korea has collaborated with companies such as Samsung Electronics, Ground X, ConsenSys, KPMG, Kakao Bank, and Kakao Pay for simulation projects. Samsung has signed a memorandum of understanding with financial regulators in the sphere of digital currencies. This document means that virtual money can potentially be integrated with phones and watches of the Galaxy line produced by the mentioned manufacturer.
Returning to the issue of solving the problems of existing voucher systems within the framework of the CBDC pilot program, it should be noted that in this case, the Bank of Korea intends to work to eliminate such negative circumstances as high transaction fees, processes characterized by complexity and slow speed of implementation, limited checks after operations with money and concerns related to the risk of fraudulent interference.
Currently, according to media reports, South Korea’s financial regulator is choosing a city that will become a kind of testing ground for the test implementation of virtual currency. The program can be launched in Busan, Incheon, or Jeju.
Also, the Bank of Korea is currently conducting a pilot project in partnership with the Bank for International Settlements (BIS) and other financial institutions to verify the possibility of wholesale use of CBDC in settlements on tokenized deposits of commercial lenders and the programmability of these deposits.
In the sphere of virtual currencies, another landmark event was the statement by the Board of Governors of the European Central Bank that the digital euro is feasible and about the transition to preparing its implementation. This statement was made last week.
Japan has announced its plan for a CBDC pilot program in April. After that, negotiations on the digital yen began with 60 companies. India launched a retail virtual currency project in December 2022. In May, the first round of the CBDC pilot program began in Hong Kong, with 16 firms participating.
As we have reported earlier, IMF Says About Potential of CBDC.
