Bank of Korea pilot-tests central bank digital currency
The Bank of Korea has decided to proceed with a pilot test on central bank digital currency (CBDC). Various countries around the world are actively issuing CBDC. The United States and Japan, neither of which have immediate plans to issue digital currency, are also considering changing their stances. Following the global trend, Korea’s central bank is reviewing the adoption of CBDC, but it maintained its stance that issuing the currency in the near future will not be necessary. The BOK on April 6 announced it is reviewing technical and legal issues that are required to build the pilot system for the issuance of CBDC. The central bank had a lukewarm attitude towards digital currency at the beginning of the year, but appears to have changed its stance more recently. CBDC has generally been more common in developing nations, including Ecuador and Uruguay. But it has recently spread to more diverse countries, including Sweden and China, that are trying to respond to the reduced reserves of cash and the rise of private digital currency. The United States and Japan also said they will strengthen their research on CBDC. “Business expansion of private digital currency markets has become unpredictable in recent years, when a technological revolution in the field of payment system is progressing fast,” said the central bank. “To tame preemptive measures as the environment rapidly changes, the BOK will review technological and legal issues necessary for the adoption of CBDC and build a test-pilot system this year and next year.” While acknowledging the need for the research, the central bank maintained that it is opposed to issuing the digital currency in a broad sense in the near future. “The need for the issuance of CBDC in the near future isn’t highly necessary, considering the existing demand for cash, competitive payment service market and high acceptance for finance,” the BOK continued. #How will the research be conducted? The research will be conducted by a digital currency research team and a technology team that have been newly established at the BOK. An advisory panel consisting of internal and external experts to review technical and legal issues will be formed. A task force will be also formed. The BOK will first review the CBDC system’s operating method and technical requirements, considering the domestic payment environment and its technological level. It will further review technologies that can be realized and the feasibility of adopting blockchain. Once technical requirements and designs have been determined, it will receive consulting from an external organization. Afterwards, the pilot system will be established. Whether the system functions normally in the restricted environment is the key to the pilot system. The BOK pans to provide specific way to revise the related ordinance and strengthen cooperation and interaction overseas to share its research accomplishments. #Deadline The technical review will be conducted over 22 months, though December 2021. The central bank will work on determining the defining requirements of CBDC until July. Reviewing technologies will take place in April through August. Analyzing the work process and receiving consulting service will take place in September through December. Establishing and testing the CBDC pilot system will be conducted from January 2021 next year through December. The legal review and building interactions with overseas research teams take place throughout the process.