Italy, South Korea sign MOU for CBDC, payment systems and ICT

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Italy’s central bank, Banca d’Italia, has signed a memorandum of understanding (MoU) with its South Korean counterpart to explore the prospects of a central bank digital currencies (CBDCs) collaboration.

According to an official disclosure by the Banca d’Italia, the MoU with the Bank of Korea (BOK) will see both banking regulators strengthen their partnerships on IT and payment systems. Both central banks will share knowledge and information toward integrating CBDCs into their financial systems.

“In particular, the Memorandum of Understanding provides for the mutual sharing of knowledge and information on the topics of ICT technologies in support of real time settlement systems (RTGS) and the central bank digital currency,” the announcement read.

Bank of Italy General Director Luigi Federico Signorini said the South Korean central bank could leverage the previous experiences of the Italian regulator dealing with CBDCs. The Italian central bank has participated in the European Central Bank’s (ECB) attempt to launch a retail CBDC since 2020, but there appears to be a divergence in approach from both parties.

Italy’s banking regulator has been throwing its weight behind the interoperability of the digital euro in settling on-chain transactions, leaving the bulk of the technical and policy work for the ECB.

Meanwhile, South Korea, with its late entry into the CBDC race back in October, is grappling with technical, regulatory, and economic concerns for the digital won. Local reports indicate that the country’s official CBDC pilot scheduled for 2024 will begin with 100,000 participants, leaning on commercial banks to onboard users.

Aware of the uphill task, the Bank of Korea is turning to partnerships for technical and regulatory direction. The central bank is currently in talks with the Bank for International Settlements (BIS), underscored by a meeting of BIS General Manager Agustin Carstens with officials from the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS).

“Following consultations with relevant organizations and a review of related laws, the pilot project will be conducted first in the fourth quarter of 2024,” said the BOK. “The possibility of conducting separate pilots will be considered as well if banks propose new individual projects.”

Central banks joining forces to explore digital currencies

As central banks tread into unfamiliar territories in their experiments with CBDCs, there is a growing trend of collaboration between banking regulators to cross-pollinate ideas.

In March, the central banks of the United Arab Emirates (UAE) and India teamed up to explore the possibilities of a cross-border functionality for CBDCs in a move designed to strengthen the economic ties between both countries.

China and Hong Kong are deepening their CBDC collaboration with a suite of new features to improve payments for tourists while the BIS is doubling down on its joint experiments with global central banks.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: Finding ways to use CBDC outside of digital currencies