The Central Bank of South Korea announced a pilot program of a central bank digital currency (CBDC or Central bank digital currencies) in a statement on Monday, April 6.
A pilot project by the end of 2021?
South Korea's central bank has launched a nearly two-year plan to develop a CBDC and examine its viability as a substitute for the traditional form of money, paper money. The plan began in March of this year and will be completed by the end of 2021.
Scheduled to last 22 months, the decision was triggered by steps taken by countries such as the United States and Japan to issue CBDCs. A BOK official said:
'The United States and Japan had not planned to create a CBDC in the near future, but they have recently changed their position to strengthen research in this emerging field'.
'BOK has also decided to remain proactive in the rapidly changing payment environments here and abroad, so we will set up the CBDC pilot system and check the technical and legal issues surrounding its introduction here'.
A well-defined timetable
The project is developed by a special department of BOK created in February. However, the preliminary date for the introduction of digital money by the South Korean central bank is not yet known. BOK said the introduction will not take place in the short to medium term. As in other trials elsewhere in the world, the focus is of course on its feasibility. The issue of technical assistance is at the heart of the project, with the blockchain in focus. As far as the legal aspect is concerned, the sensitive issue will be to observe the consequences of using a CBDC to provide a legal framework for its formalization.
In order to carry out its experimentation, the project program would be expected to evolve over time according to the following schedule:
- Definition of CBDC prerequisites (March 2020 - July 2020),
- Technology Review (April 2020 - August 2020),
- Analysis and advice on operational business processes (September 2020 - December 2020),
- Design and testing of the CADC and its system (January 2021 - December 2021).
The appointed working group is composed of experts from the new technology sector and legal experts, all under the umbrella of the Bank of Korea.
The spread of the COVID-19 pandemic caused a change in their attitude. Any means of containing the crisis seems justified at the present time. Fundamentally, this 'digital win' experiment aims to identify the technical and legal provisions needed to create and issue such a monetary tool.
Written by Laetitia: Project Manager
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