South Korea to test digital currency with 100,000 users in Q4 2024

SEOUL – The Bank of Korea (BOK) is set to conduct pilot tests of a central bank digital currency (CBDC) involving 100,000 participants in the fourth quarter of 2024. This groundbreaking trial will use public vouchers to simulate real-world transactions, reflecting the current certificate deposit (CD) tokens issued by banks. The BOK’s strategy, developed in conjunction with the Financial Services Commission (FSC) and Financial Supervisory Service (FSS), aims to address inefficiencies in existing financial systems, particularly those highlighted by voucher-based programs during the COVID-19 pandemic and for childcare support.

The initiative has received commendation from Agustin Carstens, General Manager of the Bank for International Settlements (BIS), for its forward-thinking approach. During a seminar on CBDCs held today, Rhee Chang-yong pointed out that South Korea would not issue a CBDC before the United States and Europe. However, the central bank is moving forward with preparations to integrate CBDC into a distributed ledger system for simulating carbon credit trading. This simulation is part of broader technological tests that will also assess legal considerations relating to payment tokens and their application in delivery versus payment scenarios within environmental financial markets.

Carstens, speaking at an event in Seoul today, underscored the importance of central bank leadership in advancing CBDC projects. He called for the development of programmable wholesale CBDCs and the tokenization of assets, noting that current legal frameworks are insufficient for supporting CBDC issuance. He stressed the need for definitive legal structures and a unified ledger vision that allows for complex contract execution involving diverse assets on a single platform.

The BOK’s ongoing CBDC tests since August 2021 will soon expand to encompass more comprehensive financial institution transactions by year-end. This coordinated regulatory effort is designed to streamline asset management across different classes and pave the way for a more efficient financial ecosystem.

Despite stricter regulations following the Terra-LUNA incident in 2022, the South Korean government continues to back the growth of the country’s cryptocurrency regulatory framework and ecosystem. The upcoming real-world experiments and technological tests mark significant progress in South Korea’s journey toward integrating digital currency into its financial landscape.

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