The South Korean Central Bank is accelerating its CBDC project and plans to pilot its digital KRW with a group of 100,000 citizens later this year. The Bank of Korea will conduct tests on digital KRW usability and deposit functions at the end of 2024, in collaboration with top regulators in the country. A law has been created to distinguish between CBDCs and cryptoassets like Bitcoin, and the bank is working on building a pilot CBDC network to issue and distribute different types of tokens based on institutional CBDC models.
In the fourth quarter of the year, the BOK plans to issue and distribute deposit-style tokens and e-money tokens as part of the pilot CBDC network. Real-time transaction tests will also be conducted with ordinary citizens in commercial settings in 2024 to gauge the usability and impact of the digital KRW. However, concerns have been raised about the potential negative impact of a CBDC launch on South Korea’s fintech and banking sectors. Critics believe that the commercialization of CBDC will take time and that private companies may need to prepare corresponding projects in response to the digital KRW.
Despite concerns, some of South Korea’s largest tech firms and banks have already started CBDC operations in anticipation of the digital KRW launch. It is still in the pilot stage, and the response from the private sector remains to be seen. A BOK official explained that using the CBDC could help retailers reduce fees as existing card transactions typically incur fees. In other nations fast-tracking their CBDC projects, such as Russia, analysts have predicted that the retail sector would benefit the most from the adoption of a digital currency, while the banking sector could potentially lose revenue.
The BOK official reassured the private sector that the aim of CBDC commercialization is not to encroach on existing industries but rather to provide new innovative services and opportunities for industrial development. The use of digital currencies such as the digital KRW could lead to reduced fees for merchants and innovative services for customers. The commercialization of CBDCs could potentially benefit retailers and open up new opportunities for growth in various sectors. As South Korea continues to progress with its CBDC project, it will be important to monitor the reactions of the private sector and the overall impact of the digital KRW on the country’s economy and financial landscape.
