The Bank of Korea plans to launch a pilot program for its retail central bank digital currency (CBDC) in the fourth quarter of 2024.
The program will involve 100,000 selected South Korean citizens who will be able to use tokens in the form of CBDC issued by commercial banks for purchasing goods, TechCrunch reported Thursday (Nov. 30).
This initiative aims to address the challenges faced by existing voucher systems in South Korea, according to the report.
It comes as part of the bank’s efforts to explore new forms of financial products and enhance the efficiency of daily transactions for individuals and businesses, the report said.
The Bank of Korea has been actively working on CBDC pilots since 2020, per the report. In 2021 and 2022, the bank completed two phases of pilot tests for its retail CBDC. Other tests were conducted in collaboration with the Korea Financial Telecommunications & Clearings Institute (KFTC) and 14 commercial banks.
The bank also partnered with technology companies such as Samsung Electronics, Ground X (a web3 subsidiary of Kakao), ConsenSys, KPMG, Kakao Bank Kakao Pay for simulation projects, according to the report. Samsung signed a memorandum of understanding with the Bank of Korea to conduct research on digital currencies that could potentially integrate with Samsung’s Galaxy phones and watches.
With the upcoming pilot program for the retail CBDC, the central bank aims to address the challenges associated with existing voucher systems, including high transaction fees, complicated and slow processes, limited post-transaction verifications, and concerns over fraudulent claims.
The Bank of Korea is currently in discussions to select a city from three potential candidates in South Korea, namely Jeju, Busan, and Incheon, as a test bed for piloting the CBDC, per the report.
Along with this retail CBDC, the Bank of Korea is conducting a pilot in partnership with the Bank for International Settlements (BIS) and other banks to test the feasibility of a wholesale CBDC used in the settlement of commercial bank tokenized deposits and the programmability of those deposits.
In another recent development in this space, it was reported on Nov. 22 that the Governing Council of the European Central Bank has determined that a digital euro is feasible and is now turning its attention to the “preparation” stage.