The Bank of Korea (BOK) has unveiled plans for a pilot program to test its new central bank digital currency (CBDC), according to local media reports.
The program will be conducted in collaboration with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) and is expected to launch in 2024.
The announcement follows a meeting between the BOK Governor Rhee Chang-yong and Bank for International Settlements General Manager Agustin Carstens, underscoring the global interest in digital currency innovation.
Carstens praised the initiative as a forward-looking approach to the future of monetary systems, referring to the project as the “digital Won.”
CBDC Pilot
The program will allow 100,000 Koreans to use deposit tokens based on the “digital Won” CBDC, marking a significant step in integrating digital currencies into everyday transactions in the country.
The CBDC, a digital form of money backed by a central bank, aims to streamline financial transactions and address challenges in current systems, such as high transaction fees and slow settlement processes.
Participants in the pilot program will be able to purchase goods using deposit tokens issued by commercial banks, akin to vouchers. The recruitment of participants by selected banks is expected to take place between September 2024 and October 2024, with the project running for three months.
The BOK emphasized the potential benefits of digital currencies, especially in improving efficiency and security in financial transactions. This includes special applications like government grants, where current systems face hurdles like post-transaction verification and fraud risks.
However, using these digital currencies will be limited to designated payment purposes during the pilot phase, with restrictions on personal remittance and other uses.
Additional pilots likely
The BOK is also exploring the integration of CBDC in a simulated carbon emissions trading system in partnership with the Korea Exchange. This experiment will test the viability of transactions involving carbon emissions rights and payment tokens.
Looking forward, the BOK plans to conduct the pilot in the fourth quarter of 2024, with possibilities for additional separate pilots based on proposals from banks.
This initiative places South Korea at the forefront of digital currency integration, potentially setting a benchmark for other nations in the future of financial transactions.
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