The Bank of Korea Sets Date for CBDC Pilot Program
The Bank of Korea (BOK) has announced that it will conduct a pilot program for its central bank digital currency (CBDC) in the fourth quarter of FY2024. This “real-world” pilot will involve members of the general public using the retail version of the CBDC for transactions. The BOK will collaborate with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) during this phase of CBDC development.
Wholesale and Retail CBDC Models
The BOK also plans to test a wholesale CBDC prototype. Wholesale CBDCs are designed for use in the financial and banking sectors, particularly inter-bank settlements. On the other hand, retail CBDCs serve as a substitute for cash and debit cards in payments. For its wholesale CBDC trials, the BOK will partner with domestic banks, who will tokenize inter-bank transactions using the central bank’s platforms. The Bank for International Settlements (BIS) will provide technical assistance to ensure CBDC interoperability.
Bank of Korea’s Stance on CBDC
The BOK has not made a definitive decision on whether or not to issue a CBDC. It views the pilot program as part of an exploration process to determine the optimal CBDC design model for South Korea’s financial and economic situation. The BOK emphasized that this pilot does not indicate a full-scale introduction of a CBDC. Further details, including participating banks, will be disclosed at the end of November.
Hot Take: Bank of Korea Prepares for CBDC Pilot Program
The Bank of Korea is taking significant steps towards launching its own central bank digital currency with the announcement of a pilot program set to begin in the fourth quarter of FY2024. This pilot will allow members of the general public to use the CBDC for transactions, providing valuable insights into its real-world applicability. The BOK’s collaboration with top financial regulators and domestic banks demonstrates a commitment to developing a robust CBDC ecosystem. While the BOK remains non-committal about a full-scale introduction of a CBDC, this pilot program marks an important milestone in South Korea’s exploration of digital currency innovation.
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