Korea’s central bank is looking to move forward with the implementation of a central bank digital currency at a slow but sure pace.
According to information revealed by the Korea Herald on Monday, May 24, 2021, the Bank of Korea is working on implementing a virtual environment that would allow to evaluate, control and test the various stages necessary to digitize its fiat currency.
Korea Wants a CBDC, But There’s No Rush
In this regard, the bank plans to divide its research into two parts: The first is essentially theoretical, in which they will study the best features of a CBDC, its compatibility with the current legal system, the problems that it could raise – such as data protection, offline transactions, etc.
The second, more practical stage involves real-time testing, international transactions, and payments under various IRL conditions.
The news brings Korea closer to the world of money digitization, but the authorities still emphasize their caution. This first phase will start in August this year. Still, as it is merely exploratory, it is not even a guarantee of future implementation. The central bank has not yet revealed plans for a launch in the near future. Research is expected to culminate in December.
If all goes well, the second phase is set to start a year later, in June 2022.
Korea could start using a CBDC if it proves to be better than cash in case of a decline of physical cash transactions, an official from the Bank of Korea told the Korea Herald.
“We are launching the pilot test to see how CBDC could be used as a form of safe asset when the share of cash transactions decline significantly,
According to the BOK, the Korean government has approved a budget allocation of 4.9 billion won ($4.4 million) for the execution of the project.
This would put Korea in competition to become the first developed country to launch its CBDC. China is the most advanced nation, and has already distributed several million yuan, with real-time testing in several regions.
The United States is also studying the feasibility of a digital dollar, and several countries in Europe have been quite enthusiastic about the idea of a CBDC. France, for example, has already entered into agreements with Tezos to use its blockchain as the infrastructure for a CBDC and banks are already using Tezos to issue security tokens.
Start Your Engines!
Several startups and leading corporations in the tech/finance world within Korea are gearing up to work with the BOK on the CBDC project.
Prominent among the software tech companies are Naver and Kakao, both responsible for two popular messaging and social networking apps in South Asia. Both are launching fintech and blockchain units to ensure a good service offering to the BOK.
But hardware giants LG and Samsung are also waiting for the right time to introduce their services. Samsung is investing in Samsung SDS while LG CNS, an IT unit within Samsung Corporation, is also gearing up for battle.
It seems that currently, everyone is optimistic except the Bank of Korea, but things are certainly heating up in the country.