South Korea’s Financial Services Commission (FSC) has approved a pilot program involving seven local banks to explore the application of central bank digital currencies (CBDCs) and deposit tokens in digital financial services.
In a press release published today, November 6, the FSC revealed that prominent local banks, including Kookmin, Shinhan, Woori, Hana, Industrial Bank of Korea, Nonghyup, and Busan, will participate in the pilot project.
The regulator explained that the country aims to modernize its public services by replacing traditional physical vouchers with digital ones stored on a distributed ledger for greater convenience and efficiency.
Chairman Kim Byung-hwan of the Financial Services Commission noted the project will assess “the convenience and advantages that CBDCs and deposit tokens can bring to people’s everyday lives.”
As part of the pilot, a digital voucher management platform will be implemented, allowing the government to issue and track these digital vouchers. However, the FSC has not yet provided a timeline for the project’s rollout.
In tandem with the CBDC pilot, South Korea is toughening its regulatory measures for the crypto sector. The country’s regulators are particularly concerned about tax evasion and foreign exchange violations in cross-border transactions involving cryptocurrencies.
Finance Minister Choi Sang-Mok, speaking at a recent G20 meeting, announced that businesses involved in cross-border crypto transfers will soon need to pre-register with authorities and report monthly transactions to the Bank of Korea. This preemptive step, Choi explained, addresses the regulatory gaps that have allowed illicit financial flows.
Also, the South Korean finance ministry is reportedly evaluating new foreign exchange controls specifically for stablecoins, given their impact on cross-border transactions. The ministry plans to develop a legal framework for South Korean won-pegged stablecoins and then expand the framework to include stablecoins linked to foreign currencies. The FSC will reportedly draw inspiration from regulatory models in Japan and the European Union to shape this framework.
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