South Korea’s central bank, BOK has launched a pilot program to test CBDC. This program will run until December 2021 to verify the technical and legal requirements.
06 April, 2020 | AtoZ Markets – The Bank of South Korea (BOK) has launched a pilot program to assess the logistics of issuing a central bank digital currency or CBDC. However, the South Korean central bank has no immediate plans to introduce such a currency. The pilot program will allow it to ensure that it is ready to face changing market conditions.
Bank of Korea Begins Central Bank Digital Currency Rollout
Following theoretical research conducted in February 2020, the pilot project will include a technological and legal review of the CBDC issuance. It started in March and is expected to last 22 months, until December 2021.
Technically, it will define the design of the central bank digital currency (CBDC), a method of operating the CBDC and the feasibility of blockchain technology.
On the legal side, the program will analyze the legal issues expected when introducing CBDC, and accordingly prepare a specific amendment plan for the Bank of Korea Act.
The BOK said it decided to remain proactive in the face of rapidly changing payment environments at home and abroad. So “it will set up the CBDC pilot system and check the technical and legal issues surrounding its introduction here “.
Although the commitment to a pilot project is a step forward for South Korea, the central bank maintained that the change would not happen soon. Indeed, the country is still heavily dependent on cash for many payment services markets.
The schedule for the pilot program is as follows:
- Design of the CBDC and definition of the requirements: 5 months (March 2020 – July 2020)
- Technological review: 5 months (April 2020 – August 2020)
- Business process analysis and advice: 4 months (September 2020 – December 2020)
- Construction and test of the CBDC pilot system: 12 months (January 2021 – December 2021)
No Current Plans to Go Live
The announcement made it clear that the bank sees no immediate need to free up digital currency in South Korea. But that, based on research from other countries in this area, it wants to be ready in case such an approach would become necessary:
“The need to issue a CBDC in the near future remains slim, considering the demand for liquidity that still exists. But there is a need to be able to take measures quickly in case domestic and international market conditions change quickly. “
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