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- 1 South Korea reported to commence the pilot phase of its own CBDC.
- 2 South Korea’s central bank outlined a wholesale CBDC pilot plan last month.
The central bank digital currencies (CBDCs) are treated as counters of cryptocurrencies that do not fall under the authority of any regime. Countries across the globe are seeking opportunities with digital currencies. Many of them, such as Caribbean countries with people looking for financial inclusion, have already made CBDCs operational. Recently, South Korea reported to commence the pilot phase of its own CBDC.
The statements of the Korean central bank, Bank of Korea (BOK), shed light on the details of the upcoming CBDC pilot program in South Korea. It noted that about 100K citizens will partake in the trial for the Korean digital currency. The pilot testing is expected to start by the last quarter of 2024.
South Korea’s central bank has announced a major step in the implementation of Central Bank Digital Currencies (CBDCs), revealing plans for a pilot program enabling participants to use CBDC tokens issued by commercial banks for everyday transactions.
The move was deemed to address challenges with existing voucher systems, such as high transaction fees, complex and slow processes, limited post-transaction verifications, and concerns about fraudulent claims.
Last month, South Korea’s central bank outlined a wholesale CBDC pilot plan supporting tokenized deposits in commercial banks. This distinction between wholesale and retail CBDCs is pivotal. Wholesale CBDCs primarily serve financial institutions and interbank settlements, while retail CBDCs are intended for individuals and businesses engaged in daily transactions.
The central bank’s decision follows a visit from Agustín Carstens, the general manager of the Bank of International Settlements, reinforcing the global interest in CBDC development.
As part of the pilot program, the central bank is deliberating on selecting a test bed among three potential cities in South Korea — Jeju, Busan, and Incheon. This initiative aims to gather valuable insights and data for the successful deployment of CBDCs. Notably, Seoul, the capital, is excluded from the list.
South Korea’s central bank has been actively engaged in CBDC pilots since 2020. It completed two phases of pilot tests in 2021 and 2022 for its retail CBDC. Simulations conducted from July to November 2022 involved collaboration with the Korea Financial Telecommunications & Clearings Institute (KFTC) and 14 commercial banks. Technology partners, including Samsung Electronics, Ground X (a web3 subsidiary of Kakao), ConsenSys, KPMG, Kakao Bank, and Kakao Pay, played crucial roles in these simulation projects.
Global Perspectives on CBDCs and Financial Inclusion
Central Bank Digital Currencies (CBDCs) are increasingly viewed as potential solutions to address inherent issues in traditional fiat money. James Wallis, Vice President of Central Bank Engagement at Ripple, emphasized the role of CBDCs in resolving financial inclusion challenges.
Earlier in the “Crypto in One Minute” video posted on Ripple’s official YouTube channel, Wallis discussed how CBDCs can facilitate global financial inclusion. According to him, the lack of financial inclusion hinders people from accessing basic financial services, including borrowing money and making simple payments.
As South Korea progresses with its CBDC initiatives, the global perspective on CBDCs continues to evolve, recognizing their potential to revolutionize financial systems and enhance financial inclusion on a broad scale.
Steefan George is a crypto and blockchain enthusiast, with a remarkable grasp on market and technology. Having a graduate degree in computer science and an MBA in BFSI, he is an excellent technology writer at The Coin Republic. He is passionate about getting a billion of the human population onto Web3. His principle is to write like “explaining to a 6-year old”, so that a layman can learn the potential of, and get benefitted from this revolutionary technology.
