South Korea has joined the ranks of nations launching pilot programs for central bank digital currency (CBDC). The pilot project, aimed at exploring the technical infrastructure for a CBDC, will involve the participation of private banks, public institutions, and the invaluable technical support of the Bank for International Settlements (BIS).
The joint announcement regarding the CBDC pilot program was made on October 4th by the Bank of Korea (BOK), the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS). According to the announcement, the project’s primary objective is to evaluate the feasibility of a future monetary system built upon “wholesale CBDCs.”
The pilot program encompasses not only private banks and public institutions but also includes comprehensive testing of both retail and wholesale CBDCs. Within the experimental framework of the wholesale CBDC, participating banks will tokenize their deposits and circulate them within a network closely monitored by the BOK, the FSC, and the FSS. Live testing of the retail CBDC is expected to commence following the system setup in the fourth quarter of 2024.
As is customary in CBDC testing phases, it’s important to note that the pilot trial does not necessarily guarantee implementation. Nonetheless, Lee Myung-soon, the first deputy governor of the FSS, views this pilot as a significant step toward shaping the future monetary system. He states, “The BOK has been unwavering in its pursuit of technological research related to CBDC. This test, building upon past accomplishments, marks a noteworthy stride toward developing a prototype for the future monetary system.”
These sentiments echo a statement made by one of the chief executives of Banque de France on September 3rd. Denis Beau, the first deputy governor, referred to CBDC as “the catalyst for enhancing cross-border payments and enabling the establishment of a new international monetary system.”
