The Korea Times said on Thursday that South Korea will begin a pilot programme for a central bank digital currency (CBDC) in the first quarter of 2019. The programme will involve 100,000 residents.
According to the article, the Bank of Korea (BOK) and financial authorities Financial Supervisory Service (FSS) and Financial Services Commission (FSC) will collaborate to run the pilot programme.
Under the scheme, tokens issued by commercial banks in the form of CBDC will be accepted for the purchase of goods by 100,000 persons, or around 0.2% of the nation’s total population. Use will be limited to making purchases; remittances or other uses will not be allowed. Reports from July indicated that Jeju, Busan, or Incheon were the pilot’s likely destinations.
According to the BOK, a CBDC could be the solution to issues with current government-issued grant programmes, like childcare vouchers or payments made during the COVID-19 pandemic. High transaction costs, sluggish settlement, and fraud concerns are some of the problems with the current systems.
In order to address the decline in the use of cash and the growing preference of consumers to use digital methods of payment, the central banks of most developed economies have been investigating the creation of CBDCs in recent years.
Though South Korea is among the first runner-ups, China is leading the world in the development of its digital yuan, having finished testing functions like issuing and distributing a CBDC in a simulated environment in December 2021.