The Pilot Program
The Bank of Korea (BOK), South Korea's central bank, has announced plans to invite 100,000 Korean citizens to participate in a pilot program for its central bank digital currency (CBDC). The testing phase will begin in September or October of 2024 and will last for three months.
Usage Restrictions
Participants in the pilot program will only be able to use the CBDC for payment purposes and will not have the option to store, exchange, or send it to other users. The goal of this stage is to evaluate the feasibility and effectiveness of issuing and distributing the currency.
Integration with Carbon Emissions Trading
The BOK will collaborate with the Korea Exchange to integrate the new digital currency into a simulation system for carbon emissions trading. This will allow the testing of delivery versus payment transactions and further assess the currency's viability.
Future Plans
If successful, the pilot program may be followed by additional pilots proposed by banks for new individual projects. The BOK aims to gather valuable insights and feedback from the testing phase to inform the future development and implementation of the CBDC.
International Support
The Bank for International Settlements (BIS) has expressed its support for the Korean CBDC project. Agustin Carstens, the general manager of BIS, recently visited Seoul and publicly referred to the project as the digital won. The BIS is actively involved in various CBDC initiatives globally and is providing technical support to the BOK for the pilot program.
BIS's Role in CBDC Adoption
The BIS is at the forefront of global CBDC adoption. It is assisting the Swiss National Bank in developing a wholesale CBDC and collaborating with the central monetary authorities of China, Hong Kong, Thailand, and the United Arab Emirates to build a joint platform. Additionally, the BIS is involved in multiple other CBDC projects, including a proof-of-concept for a transactions tracker with the European Central Bank.
Overall, South Korea's CBDC pilot program represents an important step towards the potential future implementation of a digital currency in the country's financial system. By involving a large number of citizens and collaborating with international entities, the BOK aims to ensure the thorough testing and evaluation of its CBDC before making any further decisions.
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