- Bank of Korea Governor, Rhee Chang-yong, states South Korea will not issue a Central Bank Digital Currency (CBDC) before the United States and European countries.
- The country will conduct a pilot test using vouchers to simulate CBDC transactions, with plans to test its use in carbon credit trading and tokenized asset settlements.
Strategic Delay in South Korea’s CBDC Issuance
In a recent seminar on Central Bank Digital Currencies (CBDCs), Rhee Chang-yong, the Governor of the Bank of Korea, articulated a strategic approach for South Korea in the global CBDC landscape. He emphasized that South Korea sees minimal benefits in becoming a leader in issuing CBDCs and therefore will not initiate its CBDC before major economic players like the United States and European countries.
The Rationale Behind the Delay
This decision underscores a cautious and observant stance, as South Korea aims to learn from the experiences and advancements of other major economies in CBDC development. The move to delay the issuance of a CBDC also reflects a desire to ensure a robust and secure digital currency system, considering the complexities and potential risks associated with such a significant financial innovation.
Pilot Testing with Vouchers
In preparation for a future CBDC rollout, South Korea plans to conduct a pilot test using vouchers. This initiative will involve 100,000 people who will test the CBDC using public vouchers in the fourth quarter of 2024. These vouchers, typically issued by state and local governments for subsidies, will be replaced with certificate of deposit (CD) tokens, acting as digital vouchers, simulating the use of a CBDC.
CBDC: A New Digital Frontier
A CBDC represents a new digital form of money issued by a central bank, parallel to the state’s physical currency. It can function as a digital payment method, with two main types: wholesale CBDCs for institutional use and retail CBDCs for individual consumers.
Exploring Other CBDC Applications
As part of its exploration into CBDCs, the Bank of Korea and the Korea Exchange are planning to simulate the use of CBDCs in carbon credit trading on a distributed ledger. Additional tests will include the issuance and settlement of tokenized assets and security tokens.
Regulatory Framework and Crypto Support
Following the Terra-LUNA crisis in 2022, South Korea has seen a tightening in its regulatory framework for cryptocurrencies, yet the government continues to show support for the evolving crypto landscape. This balanced approach aims to foster innovation while ensuring investor protection and market stability in the rapidly changing world of digital currencies.