The Bank of Korea, South Korea’s central banking institution, is beginning to take the prospects of a central bank digital currency (CBDC) more seriously.
Earlier this week, the bank announced that it had launched a pilot program that will help it assess the logistics of starting a state-backed asset.
Preparing for a Possible Tokenized Future
As the announcement explained, the bank doesn’t have any plans to launch such an asset soon. However, the pilot program will make such an endeavor much easier, should the need arise due to changing market conditions.
The plan is in line with theoretical research that the bank had conducted earlier in the year. As part of the next process, the program will consist of a technological and legal review of CBDC issuance. The program started last month, and it is set to run until December 2021.
In the initial phase, the bank will be looking to determine the proper design and requirements to set up a CBDC network. The phase will run until July 2020, and it will run with a review of the right technology that will be used to implement the currency – another process, which should run from April to August 2020 on its own.
Upon the completion of the two processes, the bank will analyze the business processes until December 2020. For the entirety of 2021, it will go on to test the build and possible implementations of the pilot system.
The bank did well to point out that it’s not necessarily looking to issue s CBDC. However, given that a lot of countries have shown a vested interest in the field. The government is hoping to conduct some work and stay prepared if a need to pivot arises.
“The need to issue a CBDC in the near future remains slim when considering the demand for cash that still exists, the competitive payment service market and high-level financial inclusion, but there is a need to be able to quickly take steps in case of market conditions at home and abroad change rapidly,” the announcement explained in part.
CBDC Movement Picks Up Steam Again
CBDC development is beginning to kick in high gear for several developed countries. Following an exploratory collaboration that was developed earlier this year at the World Economic Forum, several countries have taken it on themselves to see where this train could lead.
Apart from South Korea, France has also launched a CBDC experiment program. Last week, the Bank of France published an agreement, where it called for applicants to experiment with the use of a digital Euro as part of its plan to experiment with CBDCs in the clearing and settlement of tokenized assets.
The Peoples’ Bank of China is also making progress on its plans to launch a CBDC soon enough. The bank held a conference call last week, and the CBDC development was one of the topics on the agenda.
At the meeting, bank officials reiterated that their top priority for 2020 is continued CBDC research. Whether or not they will be able to launch an asset, however, remains in question.