South Korea’s BOK proposes trial of CBDC in 2024

At a recent event in Seoul, CBDC & Future Monetary System, The Bank of Korea (BOK), Financial Services Commission (FSC) and Financial Supervisory Service (FSS) announced a plan to trial a limited pilot of CBDC.

BOK proposes trial of CBDC in 2024

The announcement was timed to coincide with the visit of Agustin Carstens, general manager of the Bank for International Settlements, which has done much to set the ground for implementations of CBDC’s around the world.

The plans are a developed version of their earlier announcement that disclosed the central bank’s intention to take real-world experiments in CBDC.

Under the pilot project, 100,000 selected individuals will have the ability to purchase goods with deposit tokens issued by commercial banks in the form of CBDC, similar to using a voucher at a store.

Selected commercial banks will recruit participants in Q2 and Q3 of 2024, and will continue the project for three months.

“Public authorities need to take the lead here. Central banks should move fast to develop programmable wholesale CBDCs,” said Carstens at the forum.

“Governments have a role to play by promoting the tokenisation of as many asset classes as possible.”

The BOK explained that digital currencies have the potential to significantly address challenges with existing voucher systems, such as special grants during COVID-19 and childcare grants offered by the government.

The challenges include high transaction fees, slow settlement processes, limitations of post-transaction verification and concerns over fraudulent claims.

However, participants will be restricted to using the currency solely for its designated purpose of payment. Other uses, including personal remittance, will not be permitted at this time.

Additionally, technological experiments will be conducted to evaluate the feasibility and effectiveness of issuing and distributing these new forms of financial products.

For instance, the BOK will collaborate with the Korea Exchange to integrate the CBDC into a simulation system for carbon emissions trading.

This will include testing the feasibility of delivery versus payment transactions between carbon emissions rights and the payment tokens.

“Following consultations with relevant organizations and a review of related laws, the pilot project will be conducted first in Q4 2024,” comments an official from the BOK.

“The possibility of conducting separate pilots will be considered as well if banks propose new individual projects.”