The Bank of Korea announced the start of its digital currency trial from April to June this year, involving 100,000 participants and seven major local banks.
Purpose and Structure of the Trials
The pilot project, named 'Hangang,' aims to explore the potential of distributed ledger technology (DLT) as a substitute for traditional settlement methods. The trial involves banks like KB Kookmin, Shinhan, Hana, and Woori Bank. Participants will be able to convert their bank deposits into tokenized deposits and use them for payments at local vendors and online stores.
Technology and Limitations
Participants can make payments using mobile banking apps via QR codes. The maximum amount allowed in tokenized deposits will be one million Korean won, with an option to top up to five million won. The trial seeks to determine if tokenized deposits can reduce intermediaries in transactions and enable merchants to receive real-time settlements. The Bank of Korea also clarified it has no plans to include Bitcoin in its foreign exchange reserves.
Global Context and Prospects
Around 90% of the world’s central banks are exploring digital versions of their currencies, aiming not to lag behind cryptocurrency. Some countries, such as the Bahamas, Nigeria, and Jamaica, already have operational CBDCs, and China is conducting advanced digital yuan trials. The European Central Bank is working on a digital euro, and SWIFT plans to launch a new platform to connect CBDCs with the existing financial system.
The Bank of Korea’s CBDC trial is part of a global move towards exploring digital currencies' potential. This will help assess distributed technology's potential to improve financial transactions and prepare for a possible digital economic transformation.
