The Bank of Korea plans to test the central bank digital currency (CBDC) in one of the major cities. Among the candidates are Jeju, Busan, and Incheon, with a combined population of over 7 million people.
The Bank of Korea (BOK) considers the cities of Jeju, Busan, and Incheon as potential locations for a series of closed experiments and “live” tests of the central bank digital currency (CBDC). This was reported by a local media outlet.
Choosing Jeju, Busan, and Incheon isn’t random. These regions are home to additional currencies issued by commercial banks apart from the South Korean won, whose use is clearly geographically restricted. In particular:
- Tamna Jeon is issued in Jeju;
- Dongbaekjeon is issued in Busan;
- e-Eum is issued in Incheon.
Thus, the Bank of Korea plans to test CBDC’s interoperability with the local issuance and distribution structure of currencies released by municipalities. According to an anonymous BOK official, negotiations are currently underway with major chain stores and other companies in the candidate areas.
However, from a technical point of view, Korea’s CBDC system differs considerably from the structure of existing local currencies. Hence, the pilot project will require some changes to the CBDC structure. In this regard, the Bank of Korea has established a special IT department, where it’s actively recruiting specialists.
Since the planned testing will affect end users, the population density in the regions will also play a key role in the decision-making process. In this context, Busan and Incheon, each with a population of about 3 million, have a clear advantage over Jeju, which has a population of less than 700,000. Yet, the overall usage of Tamna Jeon in Jeju is quite high, despite the region’s lower population density.
The BOK recently reported on the successful trials of CBDCs as part of its performance testing for offline payments and cross-border transfers.
