South Korea to Launch CBDC Pilot Program for 100,000 Citizens in 2024
In Brief
In a pioneering move, South Korea is gearing up to introduce a pilot program that will involve 100,000 citizens in the use of deposit tokens based on the central bank digital currency (CBDC).
This initiative is a collaborative effort between the Bank of Korea (BOK), the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS). A central bank digital currency, or CBDC, represents a new form of digital currency issued directly by a country’s central bank.
The plans were officially announced following a visit by Agustin Carstens, the general manager of the Bank for International Settlements, to the BOK. This initiative is a continuation of the central bank’s commitment to exploring real-world applications of CBDC, as previously disclosed in October.
CBDCs for Designated Payments Only
Under this pilot project, selected commercial banks will enlist participants from September to October of the following year, running the program for three months. Participants will be able to make purchases using deposit tokens issued by these commercial banks, similar to using a voucher at a store.
The introduction of digital currencies through CBDCs aims to address various challenges associated with existing voucher systems. These challenges include high transaction fees, slow settlement processes, limitations in post-transaction verification, and concerns about fraudulent claims.
However, participants in the pilot program will have limitations on the use of the currency, primarily for its designated purpose of payment. Personal remittances and other uses will not be permitted during this phase.
In addition to enabling digital payments, the pilot program will also include technological experiments. These experiments will evaluate the feasibility and effectiveness of issuing and distributing these new financial products.
Integrating CBDC into Carbon Emissions Trading
One noteworthy experiment involves collaboration between the BOK and the Korea Exchange to integrate the CBDC into a simulation system for carbon emissions trading. This integration will explore the feasibility of delivery versus payment transactions between carbon emissions rights and payment tokens.
The BOK plans to initiate the pilot project in the fourth quarter of 2024 after consultations with relevant organizations and a review of related laws. If successful, this pilot could pave the way for future developments in digital currencies and their practical applications.
During his visit, Agustin Carstens referred to the project as “digital Won” and commended the BOK’s proactive approach to shaping the future monetary system. This pilot program signifies South Korea’s commitment to exploring innovative solutions in the realm of digital currencies, with the potential to influence the future of financial transactions.
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Nik is an accomplished analyst and writer at Metaverse Post, specializing in delivering cutting-edge insights into the fast-paced world of technology, with a particular emphasis on AI/ML, XR, VR, on-chain analytics, and blockchain development. His articles engage and inform a diverse audience, helping them stay ahead of the technological curve. Possessing a Master's degree in Economics and Management, Nik has a solid grasp of the nuances of the business world and its intersection with emergent technologies.
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Nik is an accomplished analyst and writer at Metaverse Post, specializing in delivering cutting-edge insights into the fast-paced world of technology, with a particular emphasis on AI/ML, XR, VR, on-chain analytics, and blockchain development. His articles engage and inform a diverse audience, helping them stay ahead of the technological curve. Possessing a Master's degree in Economics and Management, Nik has a solid grasp of the nuances of the business world and its intersection with emergent technologies.
