South Korea’s central bank, the Bank of Korea (BOK), is gearing up for a significant trial of its central bank digital currency (CBDC). Scheduled to launch between September and October 2024, this three-month pilot will engage 100,000 Korean citizens, as revealed in a Korea Times report dated November 23. Participants in this trial will have the opportunity to use deposit tokens for purchasing goods.
This pilot phase will limit the CBDC’s application strictly to payment transactions, disallowing any storage, exchange, or transfer of the digital currency among users. The primary aim is to evaluate the CBDC’s distribution and issuance processes for their effectiveness and practicality.
Moreover, the BOK is collaborating with the Korea Exchange to incorporate the digital currency into a simulated carbon emissions trading system. This initiative aims to test the feasibility of ‘delivery versus payment’ transactions. According to the BOK’s statement in the report, the bank is open to considering additional pilot programs based on innovative proposals from banks.
The timing of this announcement aligns with Agustin Carstens, the general manager of the Bank for International Settlements (BIS), visiting Seoul. Carstens has acknowledged the Korean CBDC project, referring to it as the ‘digital won.’
Initially announced in October, the BOK’s CBDC pilot will explore both retail and wholesale dimensions, involving collaborations with private banks and public entities. The BIS is set to offer its technical expertise in this endeavor.
The BIS plays a pivotal role in promoting CBDC adoption worldwide. It is aiding the Swiss National Bank in crafting a wholesale CBDC and is involved in creating a joint platform with central monetary authorities from China, Hong Kong, Thailand, and the United Arab Emirates. The BIS is also developing a transaction tracker proof-of-concept with the European Central Bank, among its various other global projects.
