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South Korea makes a new move with its CBDC

By:
on Apr 6, 2020
Updated: Jun 1, 2022
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  • South Korean central bank has launched its CBDC testing program.
  • The program saw the launch in March, and it will end in December 2021.
  • The bank insists that there is no need for CBDC, but it wishes to be ready if the situation changes.

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South Korean central bank, the Bank of Korea, just made a new move regarding its digital won. The country’s central bank continues to stress that there is still no need for a CBDC. However, despite this, it launched a pilot program for testing its coin.

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The bank’s announcement says that the launch took place last month. It will run for quite a long time — until December 2021, or 22 months, in total. The new program will serve in identifying technical difficulties and legal requirements for creating and issuing CBDCs.

It will also help the bank with defining a CBDC design, as well as its operation method. The bank also needs to see if it is feasible to implement blockchain tech, in the first place.

There is also a legal perspective, as there are plenty of things to consider from this point of view regarding CBDC. The bank would need to prepare a specific amendment plan, and ensure compliance for its crypto program.

Four stages of testing

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The program is broken down into several stages, each of which will last for several months.

The first stage will work on the CBDC design and requirement definition. It will last from March 2020 until July 2020 — 5 months in total. The second one will review the project’s technology, and it will also last for 5 months. It will start in April 2020, and end in August of the same year.

The third stage will include business process analysis and consulting. This one will be slightly shorter, lasting four months, between September and December of this year.

Lastly, the pilot system construction and the tests themselves will take place throughout 2021. This stage will start in January next year, and end in December.

COVID-19 pandemic might help drive the adoption of digital payments

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As mentioned, the bank still doesn’t believe that a CBDC will be necessary in the near future. It stated that there is still quite a large demand for cash. However, should the situation change, it wishes to prepare itself, which is why it is conducting tests early.

The bank started researching the coin in December 2019, when it hired numerous experts for the job. Now, even the Bank of International Settlements (BIS) noticed a growing interest in crypto payments. The change is likely caused by the coronavirus pandemic, as physical cash might help spread the disease. As a result, many are looking into digital payments.

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