South Korea to start distributing digital won by next year

South Korea to start distributing digital won by next year

By Benson Toti - min read

The pilot scheme will be carried out in a virtual environment by the Bank of Korea

The Central Bank of South Korea (BoK) has announced it will start the distribution phase of its central bank digital currency (CBDC) pilot scheme next year.

The Korea Times, a local media outlet, reported on the BoK’s announcement.

The central bank explained that the point of the experiment was to determine whether the digital currency is capable of replacing cash or existing forms of transaction measures. To do this, the BoK’s digital currency research team will open a server and carry out the experiment.

An official from the BoK said that the virtual environment will be created with the use of blockchain technology.

“We will create a virtual environment by using blockchain technology and test whether our CBDC can be used for real-world transactions. The CBDC will be issued and circulated in the virtual world and we are going to test a number of transaction scenarios under a variety of circumstances,” he stated.

The official added that as of writing, the BoK does not have any plans to partner with private companies for the test, and it will be carried out exclusively by the bank.

The BoK is currently working on the analysis part of the project, which is the second step of their three-step process. The virtual issuance and circulation of CBDCs is part of the final phase that officials are planning to begin early next year.

Back in July, the BoK wrapped up its review of the first phase of the project, and is currently building a CBDC system in cooperation with an external consulting partner. While the bank planned on taking research on the CBDC project one step at a time, they later changed their pace after major economies such as the US, EU member nations, and China accelerated developments on their own CBDC projects.

China, in particular, has been the most driven towards their goal of getting a CBDC to market. The country began its research in 2014, and has already operated pilot tests of the digital yuan in major cities, such as Beijing and Shanghai.

Local authorities have been proactive in the early introduction of digital yuan by supporting research, not just on its issuance, but also on the establishment of infrastructure to allow users to make payments through commonly used local payment platforms, such as AliPay and WeChat Pay.

The People’s Bank of China has also revealed it is working on featuring the digital yuan as an official payment method for the 2022 Beijing Winter Olympics.