The Bank of Korea has chosen three districts – Jeju, Busan, and Incheon – as pilot locations for the Central Bank Digital Currency (CBDC) trial. Referred to as the “private target CBDC test bed,” this selection was confirmed on July 31, 2023, and notably excludes Seoul, the nation’s capital.
According to a local report, the Korean central bank’s objective is to eventually designate one of these regions to conduct experiments with public payments and distribution as well as forging partnerships with franchises to facilitate CBDC transactions. The CBDC electronic wallet software will be accessible not only to local residents but also to visitors.
The Bank of Korea has revealed that the issuance and distribution of the existing local currency program, operational in several regions of South Korea, will serve as a comparable reference to the regional closed tests of the CBDC.
This local currency program was introduced during the COVID-19 pandemic as a basic income and relief payment alternative. The three potential pilot regions – Jeju, Busan, and Incheon – currently circulate their own local money under the names “Tamranjeon,” “Dongbaekjeon,” and “Incheon e-Eum,” respectively.
However, the report suggested there are several “technical barriers” that the Bank of Korea must address before it begins the private CBDC test program. Some of these challenges include recruiting a substantial number of IT personnel to support the program.
Additionally, the Bank of Korea previously conducted remote tests on the payment performance of the CBDC mock system in areas beyond the metropolitan region for approximately six months last year. However, it was found to have inferior processing speed compared to major domestic micropayment operators.
In another development, two South Korean private banks, Hana Bank and Woori Bank, are reportedly conducting investigations into the viability of tokenized deposit technology as a competitive alternative to private stablecoins and Central Bank Digital Currencies (CBDCs). Both banks are actively researching the concept of “certificate of deposit” tokens (CDs), which involves converting traditional bank deposits into digital tokens on the blockchain.
While the commencement date for the CBDC program is yet to be announced, it is expected to take place next year.
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