The Bank of Italy and the Bank of Korea Collaborate on Digital Currencies
The Bank of Italy and the Bank of Korea have recently formalized their collaboration through a Memorandum of Understanding (MOU) signed on December 5, 2023. This partnership marks a pivotal moment in the exploration and potential implementation of digital currencies by central banks, reflecting a growing global interest in the digitization of national currencies.
Knowledge-Sharing on ICT and Real-Time Settlement Systems
The essence of this MOU lies in mutual knowledge-sharing, specifically focusing on Information and Communication Technology (ICT) as it supports real-time settlement systems and CBDCs. Previously, they have engaged in joint efforts, such as the collaboration with the Monetary Authority of Singapore and the International Monetary Fund on a paper discussing purpose-bound money (PBM).
Bank of Korea’s Active Engagement in CBDC Space
The Bank of Korea has been actively engaged in the CBDC space, with notable steps taken in October, when it announced a trial of a wholesale CBDC in collaboration with the Bank of International Settlements. This initiative aims to evaluate the feasibility of using wholesale CBDCs as settlement assets for tokenized bank deposits.
Bank of Italy’s Proactive Exploration of CBDC Impacts
On Italy’s end, the Bank of Italy has been proactively exploring the potential impacts of a CBDC on the economy. In a paper published in July, the bank examined the implications of a CBDC on residents’ choices in a small open economy, with a particular focus on the banking system and economic activity.
A Reflection of Global Shift Towards Digitized Financial Future
In conclusion, the MOU between Italy and South Korea’s central banks is more than a bilateral agreement; it’s a reflection of a global shift towards a digitized financial future. As these and other countries delve deeper into the world of digital currencies, the financial landscape is poised for significant transformation.
Hot Take: Central Banks Forge Partnerships to Explore CBDCs
The collaboration between the Bank of Italy and the Bank of Korea highlights the increasing interest among central banks in exploring and potentially implementing digital currencies. By sharing knowledge and engaging in joint efforts, these banks are paving the way for a future where national currencies are digitized. This partnership signifies a global shift towards a more technologically advanced financial system, with CBDCs playing a central role in reshaping the way we transact and store value.
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