South Korea’s central bank will be launching a pilot program for its central bank digital currency (CBDC) to explore infrastructure requirements, according to an Oct. 4 joint statement by the Bank of Korea (BOK), the nation’s Financial Services Commission (FSC) and the Financial Supervisory Service (FSS).
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- According to the announcement, the pilot will assess the viability of a future monetary system based on wholesale CBDCs.
- A wholesale CBDC is primarily used by financial institutions for interbank settlements rather than every day transactions that are enabled by a retail CBDC.
- In South Korea’s CBDC pilot, participating banks will tokenize their deposits and circulate them in the network, which will then be monitored by the BOK, the FSC and the FSS.
- The Bank of International Settlements (BIS) will provide technical support for the trials.
- The live testing of South Korea’s retail CBDC is planned to start in Q4 of 2024.
- South Korea joins a growing number of Asian countries exploring CBDCs. The Hong Kong Monetary Authority launched its CBDC pilot program in May while neighboring Bank of Japan started discussions with 60 for a pilot program in July.
- At least 130 countries representing 98% of global GDP are exploring CBDCs, up from 35 countries in May 2020, according to the Atlantic Council.