South Korea’s Central Bank to Test Wholesale CBDC in Collaboration with BIS and Key Institutions
The Bank of Korea (BoK) has announced that it will be conducting a test for a wholesale central bank digital currency (CBDC) in partnership with the Bank for International Settlements (BIS) and other important institutions. The goal of this pilot project is to assess the feasibility of building a future monetary system in South Korea using wholesale CBDCs. The main focus of the experiment is to determine if a wholesale CBDC can effectively function as a settlement asset for tokenized deposits held by commercial banks. Additionally, the project will explore the programmability of these tokenized deposits and how smart contracts can enhance the functionality of CBDCs.
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) will provide oversight and guidance during the pilot. Lee Myung-soon, First Deputy Governor of the FSS, highlighted the significance of this test in advancing the country’s CBDC research, stating that it represents “a significant step towards creating a prototype for the future monetary system.”
Wholesale vs Retail CBDCs
The Bank of Korea has previously conducted trials related to retail CBDCs but determined that a retail CBDC is not currently necessary due to South Korea’s efficient payment landscape. However, they remain open to exploring CBDC technology for potential future use. The distinction between wholesale and retail CBDCs lies in their intended audiences and use cases. Wholesale CBDCs are designed for financial institutions, while retail CBDCs are accessible to the general public.
Aligned with Unified Ledger Concept
This development aligns with the Bank for International Settlements’ efforts to develop a unified ledger concept where CBDCs are combined with other tokenized assets using automated smart contracts on blockchains like Ethereum. This approach aims to streamline financial processes, enhance supply chain financing, and promote transparency and efficiency in the financial sector.
Hot Take: South Korea’s Central Bank Collaborates with BIS and Key Institutions to Test Wholesale CBDC
The Bank of Korea is taking a significant step towards the future of monetary systems by partnering with the Bank for International Settlements and other institutions to conduct a wholesale central bank digital currency (CBDC) test. This pilot project will assess the feasibility of using wholesale CBDCs as settlement assets for tokenized deposits held by commercial banks. The experiment also explores the programmability of these deposits through smart contracts. With oversight from financial regulators, South Korea aims to advance its CBDC research and potentially create a prototype for the future monetary system. This initiative aligns with the broader efforts of the Bank for International Settlements to combine CBDCs with other tokenized assets using automated smart contracts, promoting efficiency and transparency in the financial sector.
By
By
By
By
By