South Korea to Kick Off Digital Currency Experiment This Summer

The Bank of Korea will launch a pilot program for its central bank digital currency, but actual issuance is still under question.

By Andrew Asmakov

2 min read

The Bank of Korea, South Korea's central bank, has opened bids to fill the role of technology supplier for its upcoming central bank digital currency (CBDC) trial, local news outlet Korea Herald reported on Monday.

The trial, which has been allocated a total of $4.4 million (4.9 billion won), will be conducted in a “virtual environment” in two stages. The first stage is slated to run from August to December 2021.

However, as bank officials stressed, the Bank of Korea currently has no plans to issue its digital currency—the pilot’s goal is to look into its feasibility and overall effectiveness. 

“We are launching the pilot test to see how [a] CBDC could be used as a form of safe asset when the share of cash transactions decline significantly,” said the bank’s official, adding that “the necessity to issue its digital currency is not urgent at the moment.”

CBDCs refer to centralized, digital versions of native fiat currencies, such as the U.S. dollar or the euro, aiming to bring speed and security to monetary systems worldwide.

Two stages of the trial

The first stage of the trial will focus on CBDC’s basic functionalities and include testing its issuance and circulation. 

The second stage, which is scheduled to conclude in June 2022, will explore more detailed aspects of CBDC, such as cross-border transactions and offline payments. Additionally, the Bank of Korea will study the effectiveness of digital currencies in protecting user privacy.

Several tech giants, including Naver, Kakao, and LG, have reportedly expressed their interest in the central bank’s forthcoming trial. Samsung, South Korea’s largest industrial conglomerate, is also expected to decide whether to bid for the pilot program.

For the past several years, central banks and governments across the globe have been researching the feasibility of CDBCs. 

While many of them are still cautious about introducing a new form of digital money, several other countries have already made significant advancements. China is already piloting a digital yuan, and the Bahamas has already launched its Sand Dollar

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