Bank of Korea launches CBDC pilot. 100,000 Koreans will get a taste of digital won.

Bank of Korea Introduces CBDC Pilot Program 100,000 Koreans to Experience Digital Won

This is an “important step” for South Korea to integrate digital currencies into daily financial transactions.

According to the latest reports, over the past two years, the Asian region has been competing to launch central bank digital currencies (CBDCs), and the digital Korean won is the latest currency to enter a crucial stage.

According to the Korea Times, South Korea is launching a pilot program to embrace digital currencies and enable 100,000 Koreans to use deposit tokens based on CBDC.

This initiative is a joint action between the Bank of Korea (BOK) and financial institutions, marking an “important step” in integrating digital currencies into daily financial transactions.

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During the visit of Bank for International Settlements General Manager Agustin Carstens, the Bank of Korea, the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) jointly announced this advanced plan.

The plan is an upgraded version of the initial announcement in October, which emphasized the central bank’s intention to experiment with CBDC in practical applications.

The pilot project will be launched by the end of 2024, and selected participants can use deposit tokens issued by commercial banks to purchase goods, similar to vouchers. The recruitment period for these banks to recruit participants is expected to be around September to October of the following year, and the project will last for three months.

The Bank of Korea expects that CBDC can effectively solve the challenges faced by the existing voucher system, such as the voucher system used during COVID-19 or the government childcare subsidy system. This digital approach can greatly alleviate issues such as high transaction costs, slow settlement speeds, transaction validation restrictions, and fraud problems.

However, pilot participants will be limited to using the digital currency for payment purposes only, and personal remittances and other purposes are currently not within the scope of the pilot.

To evaluate the feasibility and impact of these new financial products, the Bank of Korea also plans to conduct further technical experiments. For example, the Bank of Korea plans to collaborate with Korean exchanges to incorporate CBDC into a carbon emissions trading simulation system and test its effectiveness in real-world scenarios.

When meeting with Bank for International Settlements General Manager Agustin Carstens, the plan was referred to as the “digital Korean won”, and he expressed appreciation for the measures taken by the Bank of Korea to modernize the monetary system. This pilot project, after consultation and legal review, is expected to improve the country’s current payment channels and people’s daily use cases.

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