- The Central Bank of South Korea announced that it has completed the design and technology review of its digital currency and will now focus on testing it.
- According to a local media, the tests will begin in 2021.
The actions that are being deployed in nations such as Sweden, France, Japan, the Bahamas and the People’s Republic of China related to the investigation, testing and implementation of their own CBDCs, are facts that highlight the urgent need that has arisen in the world of expanding digital payments and safeguarding monetary sovereignty.
The Central Bank of South Korea (BOK), reported last Wednesday, October 7, that it is progressing in the pilot tests to be able to test the practical uses of its digital currency, planned for next year 2021.
CBDC testing start
The news agency of that country, Yonhap, commented that the BOK has completed the design and technological review stages of the digital currency, and now focuses efforts on working on the tests of the CBDC concerning distribution and circulation.
However, the Central Bank has confirmed that carrying out the pilot program does not in any way imply that a specific CBDC is being put into operation, making it clear that only experimental and evaluation tests will be carried out.
According to the technical report of the project, the banking entity would be in charge of the issuance, supervision of the circulation process and rescue of the CBDC currency: while associated private financial institutions, will focus on marketing.
“The CBDC test system can be thought of as the process of actually circulating the cash“a Bank of Korea official told Yonhap.
The BOK will simulate transactions on a blockchain platform as part of the projected pilot test to apply for approximately 22 months, and similar in characteristics to those used with the handling of cash or traditional means of payment.
“The CBDC will be issued and circulated in the virtual world and we will test a number of transaction scenarios in a variety of circumstances.“said an official.
In April the BOK released a document explaining the actions to be implemented for the possible issuance of its own CBDC, called “BOK 2030 Ten-Year Plan”.
The phases for the development of the project focused on:
1. Research to define the necessary requirements, including blockchain technology and digital currency design. These works culminated in July of this year.
2. Experimental tests for the review of the necessary technology in the implementation, seeking to demonstrate the feasibility, feasibility and use cases, ending in August, and in parallel, work began on the search for a probable infrastructure with an external partner, a negotiation process that is scheduled to end this year.
3. In the future, it is planned to build and test the construction of the CBDC, to track digital currency transactions in the retail and commercial sectors.
If successful, the digital currency will be put into circulation, and although there is no exact date yet, it is planned for the years 2022 and 2023.
In this stage, various actors external to the Central Bank will participate, such as financial services, commercial law and information technology (IT) companies that will act as external consultants to supervise the development and operation of the CBDC.
Another task that has already begun and that will continue until the BOK’s digital currency issuance project is completed, is the work of a qualified legal advisory group, in charge of studying the most appropriate way to establish this national cryptocurrency.
Pandemic affects the international payment system
The global situation that has originated with the COVID 19 pandemic has affected not only personal, work and family dynamics, but also the development of the economic and banking systems.
In the same way, this has also encouraged some nations to accelerate projects aimed at introducing digital methods such as CBDCs, caused by the effects that have been observed in the payment infrastructures established by central banks, and accelerating the issue of exit. of retail central bank digital currencies (CBDC).
The subject was exposed in a bulletin of the Bank for International Settlements (BIS) of April 3, 2020, which stated the following:
“A realistic assessment of the risks of transmission through cash is particularly important because there could be distributive consequences of any shift away from cash. If cash is not generally accepted as a means of payment, this could open a ‘payment gap’ between those who have access to digital payments and those who do not.“, as indicated The Block Crypto.
In this approach, the adoption of blockchain technology in the financial system and as part of the issuance of a digital currency is on the table, and many countries see it as a means of support and security for each transaction.
The BOK has already jumped on the global CBDC bandwagon and is heading to make the project become a reality.
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