Bank of Korea (BOK) has been testing its central bank digital currency (CBDC) since August 2021. BOK recently reported that the first phase of the digital currency issuance and distribution pilot has successfully been completed, and it’s ready for the second phase.
According to a Monday report by The Korea Herald, the Korean CBDC will be ready until June 2022. BOK will then start its public commercialization and distribution with the help of financial institutions.
The BOK reported, “In Step 1, a simulation environment is created in the cloud and the basic functions of the implemented CBDC (manufacturing, issuance, distribution, etc.) work normally.” Adding, “Based on this, we plan to verify the possibility of implementing various additional functions (offline payment, etc.) and applying new technologies (such as technology to enhance personal information protection).”
The second phase will mostly be focused on offline payments to allow CBDC transactions even if their devices are disconnected from the internet. Unlike the blockchain technology that always requires an internet connection, the Korean CBDC will have secure storage called the “Secure Element” for storing offline transactions.
According to BOK’s report, the Central Bank does not want to completely replace its fiat currency with CBDC but use it “as a backup payment method along with real money in situations where it is difficult to use private payment and settlement services due to telecommunication company failures.”
They added, “We are testing a slew of measures that could minimize the negative impacts of the digital currency on financial stability.”
Who are the first CBDC pioneers?
The first countries to officially distribute its CBDCs are Nigeria, the Bahamas and some East Caribbean nations. Additionally, Singapore, Malaysia, South Africa and Australia have been testing cross-border payments with CBDCs since September 2021 — dubbed Project Dunbar.
On Jan 20, the United States Federal Reserve published a report on a U.S. Dollar pegged CBDC, saying that it could improve the financial system.
Furthermore, China has been testing Digital Yuan for the past two years and had more than 261 million users at the end of 2021 with more than $13.68 billion of total transactions.
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