South Korea is moving forward with its plans to introduce a central bank digital currency (CBDC) by selecting just three areas to serve as a pilot project. According to a report from a local South Korean media outlet on July 31, 2023, the Bank of Korea has chosen Jeju, Busan, and Incheon as contenders for the private target CBDC test bed while leaving the nation’s capital, Seoul, out of the picture.
The Bank of Korea intends to pick one of the aforementioned regions for testing as part of the pilot project, which aims to examine the issue and distribution of the CBDC. Securing franchisees that can take payments via CBDC and testing payments and distribution on a public scale are also part of the procedure.
“The CBDC electronic wallet app will allow not only local residents but also many civilians, such as tourists, to participate,” said a bank official.
The CBDC regional closed testing will resemble the regional local currency systems currently in use throughout South Korea. This local currency programme was implemented as a basic income and relief payment option during the COVID-19 pandemic. The local currencies of Jeju, Busan, and Incheon, called as “Tamranjeon,” “Dongbaekjeon,” and “Incheon e-Eum,” respectively, are now printed and circulated.
According to a representative of a Korean commercial bank, Jeju, which has the second-largest population, was chosen heavily because Busan’s population of eligible residents is “so large that the Bank of Korea is burdened in many ways.”South Korea has been working on the CBDC project from at least 2020 as a part of a larger investigation in recent years. Several banks in South Korea have also disclosed that they are investigating stablecoins as potential CBDC substitutes for efficiency.
Comparatively speaking to CBDCs, the local currency programme faces fewer technical challenges. Success of the pilot project may open the door to a more thorough deployment of CBDCs in South Korea, in line with current worldwide developments in the field.
In the past, the Bank of Korea and the South Korean electronics behemoth Samsung have collaborated on innovative CBDC research, including offline CBDC payment technologies. Through their cooperation, these companies hope to improve payment security and investigate cutting-edge ways to use digital currency.
The South Korean CBDC pilot project is a key step in the development of the nation’s digital currency and reflects the rising demand for CBDCs globally.