The Bank of Korea (BOK), the country’s central bank has launched a pilot program for testing its national CBDC – the Digital Won.
Announced this week, the BOK says the program is set to run for 22-months till December 2021, and is aimed at evaluating technical and legal requirements needed to create and issue a digital currency.
For its technical phase, the BOK will test and study the digital currency (CBDC) design, the mode of operation of proposed CBDC, and the feasibility of blockchain technology to implement the new currency.
On the legal side, the test will analyse expected legal restrictions rising from the issuance of CBDC; and in line with recommendations, proceed to an amendment plan for the Bank of Korea Act.
A schedule of the pilot CBDC test reads:
According to the BOK, while the bank agrees that the demand for cash still exits, hence the CBDC program currently aims to prepare the bank for future changes in the payments sector.
“The need to issue a CBDC in the near future still remains slim when considering the demand for cash that still exists, the competitive payment service market and high-level financial inclusion, but there is a need to be able to quickly take steps in case market conditions at home and abroad change rapidly.”
Other Central Banks across the world have also taken up CBDC initiatives; from France, Sweden, Canada and more, these national banks are experimenting different stages and degrees of digital currency projects.
A recent report by the Bank for International Settlements (BIS) predicts a change in consumer behaviour towards use of cash/fiat currency over concerns of coronavirus contamination. The BIS notes that these concerns could foster a demand for digital payments like CBDCs.
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