South Korea to Launch CBDC Pilot Program with 100,000 Participants
The Bank of Korea (BOK) is preparing to launch a pilot program for a central bank digital currency (CBDC) in collaboration with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). This initiative will involve 100,000 citizens and is scheduled to take place next year. The decision follows a meeting between BOK Governor Rhee Chang-yong and Agustin Carstens, General Manager of the Bank for International Settlements (BIS).
Carstens praised the BOK’s efforts in embracing a future monetary system, referring to the CBDC as a “digital won.” In October, the BOK announced plans to conduct wholesale real-world experiments with CBDCs in partnership with the BIS and other institutions.
Participation and Functionality
The pilot program will select 100,000 participants who will be able to purchase goods using “deposit tokens” issued by commercial banks in the form of a CBDC. This functionality is similar to using vouchers at a store. The selected participants will be recruited between September and October next year, and the trial project will last for three months with restricted payment purposes.
A BOK official stated that the pilot project is expected to begin in the fourth quarter of 2024 after consultations with relevant organizations and a review of related laws. If banks propose new individual projects, separate pilots may also be considered.
Benefits and Technological Experiments
The BOK believes that digital currencies can effectively address issues found in current voucher systems used for special grants during situations like the COVID-19 pandemic and government-provided childcare. These issues include high transaction fees, delayed settlement times, and the risk of fraudulent activities.
In addition to the pilot program, the BOK plans to conduct technological experiments by integrating the CBDC into a simulation system for carbon emissions trading. This will test the feasibility of this new financial product.
Hot Take: South Korea Advances CBDC Adoption with Pilot Program
South Korea’s Bank of Korea is taking a significant step towards the adoption of a central bank digital currency (CBDC) with its upcoming pilot program involving 100,000 citizens. By collaborating with regulatory bodies and embracing the future monetary system, South Korea is positioning itself as a leading player in the CBDC space.
The pilot program aims to address existing challenges in voucher systems and explore the potential benefits of digital currencies. With its focus on improving transaction efficiency and reducing fraudulent activities, the CBDC has the potential to revolutionize payment systems in South Korea.
Furthermore, the BOK’s plan to integrate the CBDC into carbon emissions trading simulations demonstrates its commitment to exploring innovative applications for this new financial product. As other countries closely monitor South Korea’s progress, it is clear that CBDCs are becoming an integral part of the global financial landscape.
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