South Korea central bank to begin testing digital currency in 2021

The central bank of South Korea will begin testing a digital currency next year, becoming the latest global central bank to set out a timeline for exploring central bank digital currencies (CBDCs).

According to Yonhap report, the Bank of Korea will begin pilot transactions in 2021 to determine the feasibility of rolling out a digital currency system across Korea.

The central bank has already completed work on designing the digital currency, pending real-world transaction testing, the report stated. The bank said testing would allow the bank to determine whether the digital currency worked in a “restricted environment.”

In the proposed currency system, the Bank of Korea would be responsible for issuing the digital won, while its distribution would be overseen by the country’s private banks and financial institutions.

Test transactions are to be managed by the bank on a blockchain. The bank said testing the digital currency would involve making transactions to circulate cash.

“The CBDC [central bank digital currency] test system can be seen as the process of actually circulating cash.”

While the plans for testing are not indicative of a timetable for launch, the timing could suggest the Bank of Korea is ahead of its original schedule. The bank first began researching CBDCs in April, and suggested the pilot scheme would run until the end of December 2021.

With the CBDC now reportedly designed and ready for the testing phase, the bank may well be preparing with a sooner launch date in mind.

The news comes at a time of increasing emphasis on central bank digital currencies among central banks worldwide. A number of reserve banks are known to be working on digital versions of fiat currency, which would rely on blockchain technology to power the new digital currencies.

With China reported to be at an advanced stage of testing their central bank digital currency, the race is on for other countries looking to deploy the technology.

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.

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