The Bank of Korea (BOK) has launched a wholesale CBDC pilot project with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) to research and develop the technical infrastructure of the future digital currency.
The Central Bank of South Korea has initiated a study on the CBDC’s technical infrastructure, announcing the launch of a joint pilot project with local financial regulators. According to a press release, the project will assess the viability of a future monetary system based on a wholesale version of the digital currency.
The Bank for International Settlements (BIS) will provide expert technical support to the pilot project, and the trials will be conducted with the participation of selected representatives from the private banking sector and several government agencies.
As part of the wholesale CBDC study, banks will tokenize their deposits and exchange them online under the supervision of the central bank, FSC, and FSS. BOK also plans to test a retail version of the CBDC, with testing scheduled to begin in Q4 2024.
A BOK spokesman said the launch of the pilot project didn’t imply that the government had made a final decision to issue the digital won. However, according to Lee Myung-soon, First Deputy Governor of the FSS, the pilot test will improve the BOK’s technical solutions and the CBDC could be the future of the country’s monetary system.
It’s worth noting that the introduction of government-issued digital currencies has proven to be fraught with a number of obstacles. Thus, analysts of the Information Technology Services Department of the Bank of Canada found that CBDCs could increase financial inclusion only if the authorities could provide the necessary technical base for all financial institutions, as well as increase the financial literacy of the population.
Earlier, it became known that the BOK plans to conduct some closed experiments with the use of CBDCs in one of the major cities. In addition, the Bank of Korea recently reported on the successful verification of the workability of digital currency in the framework of cross-border payments and offline transfers.
