South Korea Launches CBDC Pilot Program for Digital Won

The Bank of Korea (BOK) has revealed its pilot program for testing the central bank digital currency (CBDC), the "digital Won," in collaboration with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). The program, set to launch in 2024, aims to involve 100,000 participants in a groundbreaking initiative.

Global Recognition for Forward-Looking Approach

In a recent meeting between BOK Governor Rhee Chang-yong and Bank for International Settlements General Manager Agustin Carstens, global interest in digital currency innovation was underscored. Carstens commended the initiative as a forward-looking step toward the future of monetary systems.

Streamlining Transactions with CBDC

The CBDC pilot program will enable 100,000 Koreans to use deposit tokens based on the "digital Won" for everyday transactions. This move signifies a significant stride in integrating digital currencies into the daily lives of the public. The CBDC, as a digital form of central bank-backed currency, aims to address challenges in the current financial system, including high transaction fees and slow settlement processes.

Efficiency and Security in Focus

Participants in the pilot program will have the opportunity to make purchases using deposit tokens issued by commercial banks, resembling vouchers. The recruitment of participants is scheduled between September and October 2024, with the project running for three months. The BOK highlighted potential benefits, emphasizing efficiency and security improvements in financial transactions, including applications like government grants.

Restrictions During the Pilot Phase

Despite the advancements, the use of digital currencies during the pilot phase will be limited to designated payment purposes, with restrictions on personal remittance and other uses. The BOK is vigilant about addressing potential challenges and risks during the testing phase.

Exploring Additional CBDC Integration

In addition to the pilot program, the BOK is exploring the integration of CBDC in a simulated carbon emissions trading system in partnership with the Korea Exchange. This experiment aims to test the viability of transactions involving carbon emissions rights and payment tokens.

Setting the Stage for the Future

The BOK plans to conduct the pilot in the fourth quarter of 2024, with possibilities for additional separate pilots based on proposals from banks. South Korea's initiative places it at the forefront of digital currency integration, potentially establishing a benchmark for other nations in the future of financial transactions.