Bank of Korea plans to start a pilot run of central bank digital currency this month. Photo courtesy of Bank of Korea
The South Korean government plans to begin testing central bank digital currency this month.
The Bank of Korea and the Financial Services Commission announced they will hold a trial run of DBDC among banks and financial institutions. Advertisement
Individuals will be able to use the CBDC platform on a limited basis, starting in the fourth quarter of 2024.
“The project will assess the feasibility of implementing the future of a monetary system based on ‘wholesale CBDCs.’ Commercial banks will utilize a wholesale CBDC for interbank fund transfers and final settlements among financial institutions,” the Bank of Korea said in a statement.
“By presenting a prototype model of a future monetary system that incorporates advanced information technology, this project is expected to lay the foundation for implementing various innovative payment and financial services that differentiate themselves from existing forms,” it added.
CBDC is a form of digital currency issued by a country’s central bank. It is similar to cryptocurrencies, like bitcoin and ethereum, and are based on blockchain technology.
Unlike such cryptocurrencies, however, the value of CDBC is fixed by the central bank that equals the fiat currency.
There are two types of CBDCs, wholesale and retail. The former is typically used by financial institutions for such purposes as interbank transactions. The latter is used by consumers and businesses. Advertisement
“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 told UPI News Korea.
“Once CBDC is launched, stablecoins will face a challenge. And for the full-fledged introduction of smart cities and metaverse eco-system, CBDC will be a must,” said Moon, one of South Korea’s top experts in digital currency.
There are some stablecoins in the cryptocurrency market, including Tether and USDC, which are pegged to reserve assets such as the U.S. dollar or gold.
