The Bank of Korea (BOK) has revealed plans to conduct a pilot program for a central bank digital currency (CBDC) in collaboration with the Financial Services Commission (FSC) and Financial Supervisory Service (FSS). The program, slated for 2024, will involve 100,000 citizens and aims to assess the feasibility of a future monetary system based on wholesale CBDCs.
Pilot Program Overview
The BOK, in partnership with relevant financial bodies, has outlined a pilot project for the fourth quarter of 2024. If successful, the central bank may consider separate pilots based on proposals from commercial banks. The announcement followed discussions between BOK Governor Rhee Chang-yong and Bank for International Settlements (BIS) General Manager Agustin Carstens, who praised the South Korean central bank’s preparations for their upcoming monetary system.
Under the pilot initiative, commercial banks will issue deposit tokens in the form of CBDC to 100,000 selected individuals. These deposit tokens can be utilized for purchasing goods, akin to using a voucher. However, the use of the currency will be restricted to its designated purpose of payment, excluding additional applications such as personal remittances.
Project Timeline and Technological Experiments
Commercial banks participating in the pilot program will recruit participants between September and October of the following year. The project is set to span three months, incorporating technological experiments to assess the feasibility and effectiveness of CBDC issuance and distribution. The BOK will collaborate with the Korea Exchange to integrate CBDC into a simulation system for carbon emissions trading.
Addressing Challenges and Global CBDC Trend
The BOK highlighted that CBDCs can address challenges associated with existing voucher systems, including high transaction fees, slow settlement processes, and concerns over fraudulent claims. This initiative aligns South Korea with the global trend of exploring CBDC potential, joining other nations such as Brazil, China, and India in shaping the future of their financial systems.