The Bank of Korea published a report revealing that its simulations of a digital won had proven Ethereum isn’t scalable enough to anchor a central bank digital currency.
The central bank stated its intention in a paper it published reviewing the EU's Markets in Crypto Assets Act (MiCA), saying that South Korea's ICO ban has not been effective so far.
The Bank of Korea has invited at least ten commercial banks, including Shinhan Bank and NH Nonghyup Bank, to be part of the testing CBDC for making remittances and payments between individual users.
The pilot, which began at the end of July, aims to build a platform for supporting a central bank digital currency in Korea, and is being co-managed by Kakao subsidiary Ground X.
The pilot is to take part over two stages, with the initial basic testing phase set to conclude by December 2021, while the second phase is set to take place over the period to June 2022.
Bank of Korea has opened an open bidding process as it seeks to team up with a technology supplier as it attempts to explore the feasibility of digital won.
Shinhan Bank is hoping to collaborate with the central bank with the blockchain-powered platform, in order to assist with the development and rollout of a central bank digital currency in South Korea.
The Bank of Korea has said central bank digital currencies are not virtual assets, but an alternative form of fiat currency, requiring some legal changes ahead of any future national rollout.
The Bank of Korea will begin pilot transactions in 2021 to determine the feasibility of rolling out a digital currency system across Korea.
BOK recently concluded its first phase in its CBDC development journey which involved extensive research regarding the feasibility of a digital won. It’s now embarking on the development of the infrastructure of the digital currency, including its issuance and distribution, applications, security and data management.
The bank is now seeking a consulting firm to partner with in the new phase, according to an announcement on its site. Interested companies are requested to submit their applications to the bank.
The selected firm will work with the BOK to build the CBDC as it eyes a 2021 launch date.
An official from the bank told local English paper The Korea Times, “The BOK will team up with a consulting partner to map out the overall work process and architecture to operate the digital currency system, and both sides will also come up with specific action plans to successfully establish the pilot system on time.”
While the BOK has been stepping up its CBDC efforts, it has insisted that it’s in no hurry to launch a digital won. The bank believes that the era of the CBDC, though eagerly awaited, isn’t here yet and that most central banks are currently only conducting experiments and pilot tests.
BOK’s CBDC push has been a big turnaround from its stance last year when it downplayed the need for a CBDC in the country. “Our view is that most Korean people do not feel difficulty in making transactions with current payment methods. We are not in a stance that the central bank should hurriedly issue a similar public digital currency like some countries,” a BOK official told the Korean news outlet.
However, the bank has now become one of the leaders in CBDC advancements globally. The BOK’s enthusiasm towards a digital won seems to be finally catching up to the citizens’ love for digital currencies, with the East Asian being one of the world’s largest markets." title="South Korea central bank seeks partner to build its CBDC architecture" />
Bank of Korea is looking for a firm to partner with on the CBDC’s second phase which involves building the infrastructure.
Bank of Korea is seeking to step up its digitalization efforts with the launch of a new department that will focus on blockchain and artificial intelligence.