South Korea Launches CBDC Pilot Program
The Bank of Korea (BOK) has announced that it will launch a pilot project to explore the technical infrastructure for a central bank digital currency (CBDC). The joint announcement by the BOK, the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) was made on October 4. The pilot program will assess the viability of a future monetary system based on “wholesale CBDCs.”
Partnership and Testing
Private banks and public institutions will participate in the pilot, with expert technical support provided by the Bank for International Settlements (BIS). The BOK plans to test both retail and wholesale CBDCs. In the wholesale CBDC framework, banks will tokenize their deposits and circulate them in a network monitored by the BOK, FSC, and FSS. Live testing of the retail CBDC is scheduled to begin in Q4 2024.
Potential Future Implementation
The BOK clarifies that the pilot trial does not guarantee eventual implementation. However, Lee Myung-soon, the first deputy governor of the FSS, views it as a significant step towards creating a prototype for the future monetary system. This aligns with statements made by Denis Beau, the first deputy governor at Banque de France, who referred to CBDCs as catalysts for improving cross-border payments and building a new international monetary system.
Hot Take: South Korea’s CBDC Pilot Signals Progress Towards Future Monetary System
The launch of South Korea’s CBDC pilot program demonstrates the country’s commitment to exploring digital currencies as part of its future monetary system. By partnering with private banks and public institutions, and receiving technical support from international organizations like BIS, South Korea aims to assess the feasibility of wholesale and retail CBDCs. While the pilot does not guarantee implementation, it represents a significant step towards creating a prototype for the future. This development aligns with global trends as more nations, including France, recognize the potential of CBDCs in improving cross-border payments and reshaping the international monetary landscape.
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