South Korea has joined the league of nations venturing into the realm of digital currencies by launching its central bank digital currency (CBDC) pilot program. The initiative, spearheaded by the Bank of Korea (BOK), marks a significant milestone in the nation’s financial landscape.
The official announcement, made jointly by the Bank of Korea (BOK), the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) on October 4, revealed that the pilot project aims to delve into the intricate technical infrastructure required for a robust CBDC. Termed “wholesale CBDCs,” the project will evaluate the feasibility of a prospective monetary system under this framework.
BIS Supports South Korea’s CBDC Program
This groundbreaking initiative by South Korea involves active participation from private banks and public institutions. To ensure seamless implementation, the Bank for International Settlements (BIS) will provide expert technical support. Within the pilot, both retail and wholesale CBDCs will undergo rigorous testing. Under the experimental setup of a wholesale CBDC, banks in South Korea will tokenize their deposits, enabling their circulation within a network meticulously monitored by the BOK, FSC, and FSS. Live testing of the retail CBDC is anticipated to commence after the system setup, slated for Q4 2024.
While the CBDC pilot is underway, it is important to note that such trials do not guarantee immediate implementation. Lee Myung-soon, the first deputy governor of the FSS, emphasized the significance of this pilot, stating, “The BOK has persistently pursued technological research related to CBDC. This test, building upon past achievements, represents a significant step towards creating a prototype for the future monetary system.”
These sentiments echo those expressed by global financial leaders, including Denis Beau, the first deputy governor at Banque de France. In a recent speech on September 3, Beau hailed the CBDC as “the catalyst for improving cross-border payments by enabling the build-up of a new international monetary system.”