- South Korea has entered the CBDC race, embarking on a groundbreaking project.
- Collaboration has taken place between private banks, public institutions, and international support.
- A pivotal step has been taken towards shaping the future of the global monetary landscape.
In a joint announcement on October 4th, the Bank of Korea (BOK), in partnership with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), unveiled its central bank digital currency (CBDC) pilot endeavor. Its primary objective is to evaluate the potential of a forthcoming monetary system anchored in “wholesale CBDCs.”
Banks Partner with BIS in Groundbreaking CBDC Pilot Program
This comprehensive pilot program boasts participation from both private banks and public institutions. Moreover, the Bank for International Settlements (BIS) will provide invaluable technical support for this initiative.
The BOK’s comprehensive testing encompasses both retail and wholesale variants of CBDCs. Under the experimental framework for the latter, banks will tokenize their deposits and circulate them within the network, under the oversight of the BOK, FSC, and FSS. The anticipated launch of live testing for retail CBDCs is slated for Q4 2024.
CBDC Testing Phase Hailed as Future of Monetary Landscape
As is customary in CBDC explorations, this testing phase does not necessarily guarantee eventual implementation. Nevertheless, Lee Myung-soon, the First Deputy Governor of the FSS, hailed the pilot project as a pivotal stride toward shaping the future monetary landscape, stating:
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"The BOK has persistently pursued technological research related to CBDC. This test, building upon past achievements, represents a significant step towards creating a prototype for the future monetary system."
These sentiments echo those articulated by a high-ranking official at France’s Central Bank on September 3rd. Denis Beau, the first deputy governor at Banque de France, characterized CBDCs as “the catalyst for improving cross-border payments by enabling the build-up of a new international monetary system.”
On the Flipside
- CBDCs could concentrate significant power in the hands of central banks, potentially impacting financial privacy and individual liberties.
- The adoption of CBDCs may exacerbate the digital divide, as not everyone has equal access to digital devices and the internet, potentially leaving marginalized communities at a disadvantage.
- The CBDC pilot is primarily an exploratory phase. Not all experiments lead to widespread adoption, and the road to implementing CBDCs on a large scale is still uncertain.
Why This Matters
South Korea’s foray into CBDCs through the BOK pilot project marks a pivotal step in the evolution of digital currencies. It signals a global shift toward exploring innovative monetary systems, potentially reshaping the future of finance on a broader scale.
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To learn more about how CBDCs are reshaping the world of finance through a successful BIS trial, read here:
CBDCs Set to Reshape Global Finance After Successful BIS Trial
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