On 31 August 2020, the Bank of Korea announced it is looking to partner with an external consulting firm to establish a pilot central bank digital currency (CBDC) system.
This move towards plans for a digital won by the Bank of Korea follows an initial rejection of CBDCs in November 2019. Four months later, the bank announced its intention to pilot CBDCs after all, noting the shift in attitude towards digital currency around the world.
The first phase of the project, the ‘technology review’ and research stage was completed in July 2020. The objective of this second phase is to consult and work with a firm to help the central bank create and test the architecture for the CBDC, based on the results of the first phase. The bank aims to implement the pilot system in late 2021.
CBDC is not the only step Korea has taken in an effort to keep up with the rest of the globe in technological innovation. In July 2020, the Bank of Korea established its Digital Innovation Office, dedicated to promoting the digitalization of the Bank. This involves creating policies for new digital technologies such as AI, looking into their applications, and establishing data governance policies.
Three months ago, China proposed a ‘Cross-Border Digital Stable Currency in Hong Kong’, which outlined a basket currency made up of Chinese renminbi, Japanese yen, the Hong Kong dollar, and Korean won. This proposal is seen as a part of the 2012 initiative to create a China-Japan-Korea Free Trade zone, although little progress has been made.