TLDR
- Looking to March 2025, South Korea is planning to debut a CBDC trial involving 100,000 consumers.
- A group of seven banks, including leading commercial institutions, will distribute tokens each worth up to 1 million won.
- Shoppers will utilize digital wallets for transactions at places like convenience stores, bookshops, and through delivery services.
- Over a span of three months, this initiative intends to evaluate token issuance, customer usage, and merchant transaction processes.
- With global eyes from entities like BIS, there's a keen interest in how these CBDC trials might set precedents worldwide.
South Korea A significant exploration into Central Bank Digital Currency (CBDC) is about to commence, involving a large-scale participation of 100,000 consumers, with a potential start as soon as this month, noted by a Bank of Korea spokesperson.
This initiative will empower users with deposit tokens issued by commercial banks, allowing purchases across a variety of merchants, including local shops and cafes.
Seven financial institutions, featuring the country’s foremost commercial banks - KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, along with the Industrial Bank of Korea and Busan Bank - are on board.
CBDC research has been an ongoing project for the Bank of Korea since 2021, with the current real-world test, originally set for last year, postponed to synchronize with all stakeholders.
The trial's three core phases include the issuance of tokens by banks with digital voucher capabilities, consumer spending using these at stores, and the finalization of payments to merchants.
Participants in this trial can apply for deposit tokens from their respective banks, each receiving up to 1 million won (around $750 USD), using electronic wallets to present QR codes during transactions.
Merchants Accepting Digital Tokens
Various retailers, including 7-Eleven, Kyobo Book Centre, and the delivery service 'Ddaenggyeoyo,' have agreed to accept these tokens, along with the 'Seoul Youth Culture Pass' initiative.
The Bank of Korea has ramped up its efforts for this trial by establishing a dedicated Digital Currency Research Office and increasing its team for the CBDC endeavors.
Set to run for approximately three months, a successful trial could expedite discussions on officially integrating a CBDC in Korea, though the Bank must carefully analyze outcomes to ensure the system's efficacy and security.
Other Countries
Nations worldwide, particularly the European Union, which is advancing its own CBDC strategies, are closely following Korea’s experiment for insights.
When this trial was announced in November 2023, Cecilia Skingsley from the Bank for International Settlements (BIS) highlighted its significance, emphasizing the learning opportunity from digital economies like Korea’s.
The BIS, aiding collaboration between central banks, underscores the global impact Korea's trial could have on future digital currency evolution.
An official from the Bank of Korea pinpointed advantages of adopting CBDC.
\"Implementing CBDC could lead to enhanced payment services, reducing costs and promoting broader financial inclusion,\" the official mentioned.
The same representative acknowledged potential hurdles, saying, \"Being a novel technology, it may present challenges in practicality and security.\" Insights from this trial will guide improvements.
Touted as one of the most extensive practical CBDC experiments yet, this involves a diverse array of participants—from 100,000 users to multiple banks and retailers—offering essential insights into digital currency applications in daily activities.
