Bank of Korea headquarters in central Seoul(Yonhap)
South Korea’s central bank said Monday that it has successfully completed the pilot testing of issuance and distribution of digital currency.
The Bank of Korea has wrapped up the first phase of its two-part mock testing of the central bank digital currency in December and has been carrying out the second phase “smoothly.”
Once the second phase wraps up in June, the BOK plans to start discussions on its actual launch and commercialization. It aims to expand the scope of the testing by cooperating with financial institutions during that time as well.
The first phase involved testing of the most basic functions of the digital currency including its production, issuance and distribution in a cloud-based virtual environment.
The second phase will review the technology needed for its actual usage. Wiring and payment in an offline environment, cross-border wiring and trading of digital assets will be tested based on the technology acquired through the first phase.
BOK’s pilot testing of digital currency kicked-off in August last year, jointly with tech giant Kakao Corp,’s blockchain arm Ground X. The testing came with the growing demand and usage of cryptocurrencies in the private sector, prompting global central banks to find an alternative for cash.
China has been racing ahead of its own digital currency project, already pushing people in several of its provinces to use a trial version of the digital yuan. It is just few steps away from fully launching a CBDC, but many worry that it could be abused to bolster government surveillance of money transactions.
Nigeria, the Bahamas and the Eastern Caribbean nations have already rolled out their own digital currencies for use.
Other major economies such as the US, the EU and Japan are carrying out mock tests of their digital currencies.
In a report released Monday, the BOK expressed concerns of the side-effects that the global financial market will face once the CBDCs become fully alive.
The central bank that its monetary policy will lose its clout, while the role of the commercial banks will be scaled down.
The BOK also casted doubts on all major economies adopting their digital currencies and said it would take “a long time” for them to fully launch them.
“Central banks in major economies have been taking the stance that the digital currencies will replace cash rather than savings in banks,” the BOK said in the report.
“We are testing a slew of measures that could minimize the negative impacts of the digital currency on financial stability.”
By Jung Min-kyung (firstname.lastname@example.org