Banking Government News

Korea to trial blockchain for its central bank digital currency

south korea won digital

A month ago, we reported that the Bank of Korea (BOK) was looking to partner with a consulting firm for its central bank digital currency (CBDC). Today it shared more details about its plans for a digital won that includes a two-tier system using banks for retail distribution, in a similar manner to physical cash, reported Yonhap news

The Bank plans to use blockchain or distributed ledger technology, referring to it as the CBDC ledger. 

It might be motivated by the additional programmability that tokenized cash offers. Earlier this year, BOK disclosed that it was working on a pilot for government bonds, using blockchain for settlement and delivery versus payment. A tokenized CBDC or stablecoin would be a requirement for this use case.

As with many other major central banks, the Bank has not decided to proceed with a digital currency, and last year appeared to be a little against the idea.

Earlier this year, BOK outlined a three-step process for digital won trials, with the first technology review stage completed in July. The second step was to involve business process analysis with a consulting firm, which is the current phase. And the final stage is to build out a test solution that is targeted for next year.

Meanwhile, China is forging ahead with its digital yuan or eCNY. It recently revealed the extent of its testing to the tune of 1.1 billion eCNY or $160 million. In Europe, matters are progressing with individual European central banks starting to do testing, such as France and Estonia. And last week, the European Central Bank outlined 14 requirements for a digital euro.