According to the announcement, the pilot programme for its CBDC project will explore the infrastructural requirements for blockchain transactions.
South Korea has announced that it will begin testing its Central Bank Digital Currency with a pilot project to determine how it could be used as a transaction vehicle in the country.
South Korea to test CBDC
According to the announcement, the pilot programme for its CBDC project will explore the infrastructural requirements for blockchain transactions.
The joint statement by the Bank of Korea (BOK), the country’s Financial Services Commission (FSC) and the financial Supervisory Service (FSS), the pilot will focus on the assessing the feasibility of a future monetary system based on wholesale CBDCs.
“Creating an ecosystem of payments through the wholesale CBDCs and tokenized deposits can support the transaction of digital assets such as security token offerings, improving the efficiency of the current payment settlement system,” Kim So-young, vice chairman of the Financial Services Commission, said at a press briefing held at the bank’s headquarters in central Seoul on Wednesday.
Bank of Korea Senior Deputy Gov. Ryoo Sang-dai and Financial Supervisory Service First Senior Deputy Governor Lee Myung-soon also attended the event.
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Only banks, for now
The test will have commercial banks in the country use the CBDC for interbank transfers of funds and final settlements among financial institutions..
According to the BOK, the procedure is comparable to how commercial banks now use reserves at the central bank to make such transactions possible. The test, which will begin this month, will likely last through the end of 2024.
For the time being, only commercial banks will be able to take part in the test due to conformity with existing legislation, according to the authorities.
To prevent bank disintermediation, the central bank will not implement a retail CBDC. Instead, they will study the technology behind the currency, while the government searches for novel strategies to pique public interest in cryptocurrencies.
“Korea’s plan is to test the wholesale CBDC first. The viability of the retail CBDC will be tested later next year with limits. The exact timeline is yet to be decided,” Digital Finance Research Institute chief Moon Young-bae said.
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