Aside from the commercial bank, the Bank for International Settlements (BIS) will participate in the pilot to provide technical guidance and expertise to users.
South Korea has become the newest country to conduct a pilot program to explore the technical infrastructure necessary for a central bank digital currency (CBDC).
On October 4, the Bank of Korea, with some of the country’s financial regulators, the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS), announced plans to launch the trial run for the digital currency later this month. The move is a collaborative effort by the agencies mentioned above to evaluate the feasibility of a potential future monetary system that relies on “wholesale CBDCs”.
Commercial Banks in South Korea to Participate in CBDC Pilot Program
According to the joint announcement, the country’s commercial banks will participate in the CBDC pilot program. The bank will issue payment instruments in the form of tokenized deposits, which will be made accessible to the general public, including private and public institutions, through a CBDC network created by the central bank.
The platform is scheduled to launch this month, and the CBDC testing is anticipated to follow shortly after its debut until the end of next year.
Aside from the commercial bank, the Bank for International Settlements (BIS) will participate in the pilot to provide technical guidance and expertise to users.
“Together with the BOK, we will bring some expertise and know-how to run the experiments. But we’re also very keen to learn from the BOK’s own expertise and from the direct experience of running a wholesale CBDC project in an economy as developed and digitized as Korea,” said Cecilia Skingsley, Head of BIS Innovation Hub.
A Prototype For the Future of Monetary System
South Korea first announced its plans to explore the potential of CBDCs in 2020, and now the country has taken its first step towards adopting digital currencies.
The country had initially planned to exclusively engage with wholesale CBDCs, designed to facilitate the settlement of interbank transfers and other wholesale transactions. However, the upcoming pilot program represents a significant shift in the plan as it will involve the exploration of both retail and wholesale CBDCs.
In July, Coinspeaker reported that South Korea had chosen three cities outside the country’s capital, Seoul, to conduct the pilot program. The selected cities are Jeju, Busan, and Incheon.
While emphasizing that this exploration does not automatically equate to immediate implementation, Lee Myung-soon, the First Deputy Governor of the FSS, characterized the pilot project as a pivotal step toward shaping the future monetary landscape.
“The BOK has persistently pursued technological research related to CBDC. This test, built upon past achievements, represents a significant step towards creating a prototype for the future monetary system.”
Central Banks Exploring Potential Use of CBDCs
Meanwhile, the Bank of Korea’s CBDC pilot program aligns with a global trend, as central banks increasingly embrace CBDCs in a broader move towards digitization. Last year, the BIS conducted a survey revealing that approximately 93% of central banks worldwide were actively engaged in various CBD-related initiatives.
In July of this year, the BIS released another report asserting that over 24 countries across the globe are poised to adopt CBDCs by 2030, signaling a transformative shift in the global financial landscape.
Countries like Nigeria and the Bahamas have already adopted the digital currencies, while developed countries like the United States remain cautious about introducing a CBDC.
China, on the other hand, is taking an aggressive stance by expanding its pilot systems. At the same time, countries like Japan and the United Kingdom continue to research the potential use of digital currencies.
Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.
