South Korea to launch digital currency pilot with 100,000 residents next year

The Financial institution of Korea (BOK) rolled out particulars on its pilot program for its retail central financial institution digital forex (CBDC), stating that 100,000 chosen Korean residents will be part of the trial within the fourth quarter of subsequent yr.

The members will be capable to purchase items with tokens within the type of CBDC issued by business banks. The central financial institution mentioned {that a} digital forex might clear up points with present voucher methods, that are particular authorities grants. The challenges embrace “excessive transaction charges, sophisticated and gradual processes, restricted post-transaction verifications and considerations over fraudulent claims.”

The announcement got here a day after AgustÍn Carstens, the overall supervisor of the Financial institution of Worldwide Settlements, visited Seoul.

Final month, South Korea’s central financial institution outlined its wholesale CBDC pilot plan to assist tokenized deposits in business banks and discover new types of monetary merchandise. This distinction between wholesale CBDC and retail CBDC is necessary. Monetary establishments and interbank settlements primarily use a wholesale CBDC, whereas people and companies use a retail CBDC for each day transactions.

The central financial institution is at present discussing deciding on a metropolis from the three potential metropolis candidates in South Korea — Jeju, Busan and Incheon — as a check mattress for piloting the CBDC, per a local media report released in August. Seoul, the capital of South Korea, will not be included on the checklist.

South Korea’s central financial institution, which has been engaged on CBDC pilots since 2020, accomplished two phases of pilot assessments in 2021 and 2022 for its retail CBDC. It additionally ran simulations from July to November 2022, together with Korea Monetary Telecommunications & Clearings Institute (KFTC) and 14 business banks. The Korean central financial institution partnered with a number of know-how companions for the simulation tasks, together with Samsung Electronics, Floor X (a web3 subsidiary of Korea’s tech agency Kakao), ConsenSys, KPMG, Kakao Financial institution, Kakao Pay and extra.

After the simulation, Samsung signed a memorandum of understanding with the Bank of Korea this Might to conduct some analysis on digital currencies — these digital currencies might work with Samsung’s Galaxy telephones and watches. Samsung’s offline CBDC know-how, which makes use of near-field communication (NFC), permits contactless funds between gadgets when each sender and recipient are disconnected from the web.

South Korea joins a growing number of countries across the globe which were ramping up the exploration of digital forex methods. Japan announced its plan for a CBDC pilot program in April and started discussions with 60 firms to develop a digital yen; India launched its pilot for a retail digital currency in December of final yr. Hong Kong launched the first round of its pilot program for the e-HKD with 16 companies in Might. Most not too long ago, overseas banks, together with HSBC, Grasp Seng Financial institution, Taiwan’s Fubon Financial institution and Normal Chartered, have joined China’s pilot trial for the e-CNY, in accordance with media reports. Singapore also said it’ll “pilot the reside issuance of wholesale CBDCs to assist funds throughout business banks” subsequent yr.