The Bank of Korea is progressing to the next phase of its central bank digital currency (CBDC) development which is real-world testing. In this phase, the central bank intends to onboard commercial banks to test interoperability between the CBDC and their IT systems.
According to a report by Ajo Economy News, the Bank of Korea has invited at least ten commercial banks, including Shinhan Bank and NH Nonghyup Bank, to take part in the testing. The commercial banks will test the CBDC for making remittances and payments between individual users.
The phase is expected to conclude before 2022 ends, as the Bank of Korea says it plans to publish an updated report on the CBDC project by the end of the year. This report will be its final one before it decides on whether or not to release a CBDC.
The Bank of Korea is still undecided about releasing the central bank-backed digital currency despite having completed two phases of research into the subject.
“Even if the CBDC research is completed, it will take a long time to actually introduce it,” an official from the Bank of Korea said.
In a previous report back in May, the Bank of Korea had said it would review the pros and cons of launching a CBDC along with ongoing efforts to study regulations being proposed to regulate the digital assets industry.
South Korea’s CBDC journey so far
South Korea commenced the development of its CBDC in earnest last year. The first phase began after the central bank brought on Ground X, the ConsenSys-backed creators of the Ethereum-based Klayton permissioned blockchain, to build the CBDC platform. It concluded after the platform became able to create, issue, and redeem digital assets, as well as allow end users to create wallets.
The second stage, which began early this year, focused on introducing more advanced capabilities to the CBDC platform. It explored smart contracts, Layer 2 scaling possibilities like zero-knowledge (zk) proof technology, offline payments, tokenization, and cross-border settlements.
Details of how it conducted all these tests on the CBDC platform, including cross-border settlements, remain sketchy as the central bank is yet to publish its results of the experiments. Reports from other international regulators like the Bank for International Settlements (BIS) and G20, which have been monitoring central banks doing work on CBDCs, do not also mention South Korea.
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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