South Korea to launch digital currency pilot in August

South Korea is taking a step towards developing its central bank digital currency (CBDC) as it seeks a technology partner for the venture in its latest move. The country’s central bank intends to launch a digital won pilot in August 2021.

Despite being a global tech leader, South Korea has moved cautiously on the CBDC front. However, in March, one of the country’s largest banks Shinhan announced a new platform for the digital won. The bank called on the central bank to join forces on a CBDC trial.

And now, the Bank of Korea has revealed its intention to take a step forward in its exploration of CBDCs. The bank announced that it’s seeking to team up with a technology supplier on the initiative. According to a Reuters’ report, the bank had commenced an open bidding process in its search for its new partner.

The successful applicant will work with the regulator to research the feasibility of launching a digital won in a test environment.

One of the factors driving the bank’s dive into CBDC research is the decreasing demand and use of cash.

“The share of cash transactions is decreasing significantly. The steps we are taking now are to prepare for the changes in the payment settlement system, changing rapidly.”

Korea’s pilot program will run from August to December, the bank revealed in a press conference. The platform, once live, will contain simulations of commercial banks and retail outlets. It will also include payments via mobile phones, funds transferring and making deposits, the bank stated.

While it hasn’t explored CBDCs in great detail, the Bank of Korea sees them as the ultimate killer of Bitcoin and other digital currencies. The bank’s governor Lee Ju-yeol played down Bitcoin’s sustainability in March, stating:

“When the central bank-issued digital currency is introduced, the demand for bitcoin and other cryptocurrencies as means of payment will decrease.”

At the time, he urged for caution as more countries continue to explore CBDCs. “Prior to the circulation of a CBDC, there is a need for an inspection of technological requirements and an in-depth examination of the impact of a CBDC on the financial system,” he stated.

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