[NEWS] Bank of Korea to issue pilot CBDC for 100,000 people in 2024

It has been revealed that a pilot version of a CBDC (central bank digital currency) being jointly developed by the Bank of Korea (BOK), the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) will be issued to 100,000 people, or 0.2% of South Korea's population, in 2024. The Korea Tkmes reported on the 23rd.

The Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service announced the plan on the 23rd after Agustin Carstens, governor of the Bank for International Settlements (BIS), visited the Bank of Korea.

While calling it "the first step toward a central bank digital currency project," Carstens said governance and legal ambiguities also need to be resolved to advance the technical infrastructure.

He further stated, "Public authorities need to take the initiative. Central banks should expedite the development of programmable wholesale CBDCs."

"Governments have a role to play by facilitating the tokenization of as many asset classes as possible. Some jurisdictions and most countries are legally limited in what central banks can issue as currency. The current legal framework does not allow for the issuance of CBDC," he continued.

Given this situation, the current legal framework needs to be reviewed, and at the same time, different assets need to be put on the same unified ledger to execute transactions, and governance issues need to be addressed.

Issued to 100,000 in 2024

In this pilot project, 100,000 selected individuals will be able to purchase products using CBDC issued by commercial banks in the same way as they would use vouchers in stores. Designated commercial banks will recruit participants in September and October 2024. The project is scheduled to run for three months.

In a statement, the Bank of Korea said, "Digital currency has the potential to significantly address the challenges of existing voucher systems, such as special fertilization funds for COVID-19 and government-provided childcare subsidies." Challenges of the existing voucher system include high transaction fees, slow settlement processes, limited post-transaction verification, and concerns about fraudulent claims. It is said that all of these problems could be solved.

Pilot participants can use the CBDC only for specified payment purposes. At present, it cannot be used for other purposes such as personal remittances.

Carbon Emissions Credit Proof-of-Concept Experiments

Technical experiments will also be conducted to evaluate the feasibility and effectiveness of CBDC issuance and circulation.

For example, the Bank of Korea plans to partner with Korea Exchange to integrate CBDC into a carbon emissions trading simulation system. A proof-of-concept experiment will be conducted to examine the feasibility of remittance and trading of carbon emissions credits and payment tokens.

According to sources, the bank is also considering the possibility of implementing new individual projects.

Carstens met with Bank of Korea Governor Lee Chang-yong on the same day and called the project the "digital won," positively evaluating the central bank's efforts toward the future monetary system.

The Bank of Korea has been conducting a pilot CBDC for financial institution transactions since August 2021. They plan to verify the feasibility of CBDC in the areas of remittance and settlement by financial institutions by the end of 2024.

References:Report 1,Report 2
Image: Shutterstock

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