According to a report from cryptonews, the Bank of Korea (BOK), the central bank of South Korea, is gearing up to introduce a comprehensive plan for its Central Bank Digital Currency (CBDC) in the upcoming month of September. This strategic move is aimed at accelerating the advancement of the digital Korean won (KRW) as the country progresses into the digital economy.
According to reports from Fn News and the Byline Network, the BOK has successfully concluded a pivotal CBDC pilot program with a focus on interoperability. This involved an attempt to establish connections between its prototype digital won platform and various commercial banking services and electronic payment applications.
The development of this CBDC initiative has been a significant focus for the BOK since May. Now, the bank is poised to unveil its intentions for constructing the necessary infrastructure to support the CBDC rollout. The official announcement regarding these plans is expected to take place in September, with the BOK collaborating closely with private sector partners throughout the process.
In tandem with these efforts, the BOK has initiated the process of seeking the passage of relevant legislation through the National Assembly to provide the legal framework for the CBDC.
Furthermore, indications suggest that the BOK has engaged in discussions with the country’s prominent financial regulators. An official from the Financial Services Commission revealed that discussions are ongoing concerning the BOK’s CBDC project. The regulators’ main focus is on evaluating the plans to ensure there are no conflicts of interest. They have also emphasized the necessity of establishing an appropriate legal framework, which will depend on the specifics of the BOK’s CBDC model and the applicable laws and regulations.
One of the significant hurdles the BOK faces is obtaining the necessary legal authority to hold and manage digital assets. This aspect requires convincing lawmakers of the merits and feasibility of such a role for the central bank.
However, there has been resistance and skepticism toward the BOK’s CBDC plans. The government’s initial push for “contact-free” payment methods during the COVID-19 pandemic laid the foundation for the CBDC proposal, which was viewed as a tool to facilitate these objectives. For instance, Seoul introduced a trial phase of cashless buses in 2021, initially removing cash payments on 171 buses. This pilot program expanded to other cities as well.
Yet, these initiatives have encountered opposition from certain sectors, generating a public backlash. Lawmakers and politicians expressed aspirations for a cashless society, but critics have expressed concerns about concentrating excessive power within the BOK.
Interestingly, despite the BOK’s initial stance against launching a CBDC due to the prevalence of existing e-payment solutions in South Korea, recent developments have led to a change in course. The impetus came from the COVID-19 pandemic, and the rapid progress of China’s digital yuan pilot likely influenced the decision. Notably, the Bank of Japan has also been actively advancing its digital yen project.
In order to maintain its technological competitiveness with Beijing, Seoul is directing funds toward private-sector IT research and development efforts, similar to Tokyo’s approach. With over 90 nations already exploring the concept of CBDCs, the BOK is determined to ensure it remains at the forefront of digital currency innovation and can expedite the launch of the digital won.