The central bank of South Korea announced today the launch of a pilot scheme to test the viability of its own digital currency to replace its current payment systems.
Although the Bank of Korea explicitly notes that it has no plans of issuing the digital currency immediately as there is still significant demand for cash, it is not ruling out the possibility of creating one. This pilot test will make sure that the bank is ready to launch a digital won in case the market conditions dictate so.
The Bank of Korea Begins CBDC Pilot
The Bank of Korea announced in a press release that it has started a 22-month pilot of a CBDC for the country. The main aim of the program is to test the technology and legal requirements for a digital won.
The pilot scheme began last month and will continue until December next year. The first five months from March 2020 to July will involve identifying a possible design for the digital won.
This will be followed by the analysis of the required technology for a CBDC for another five months. The process of building and trialing the CBDC pilot system is expected to run from January 2021 until December of the same year.
However, the central bank insists that there is no need for a digital won at the moment. But if the “market conditions at home and abroad change rapidly”, it will be well prepared.
Other Countries Are Well On Their Way To Launching CBDCs
Notably, central banks are increasingly exploring digital currencies. The Bahamas launched a pilot test for its digital currency known as the Sand Dollar in December last year.
But, China was the first major economy to announce its efforts with a digital yuan. The People’s Bank of China is still continuing with the development of this digital currency and has actually made it their top priority this year.
Sweden’s central bank, Riksbank, announced in February of this year that it has already started a one-year pilot program for the e-krona.
Reports have also revealed that leaders at the Bank of Japan have held a couple of meetings with the Financial Services Agency (FSA) and the Finance Ministry to discuss how a CBDC would affect the country’s economy.
ZyCrypto also reported that a Bank of England executive said it was very important for BOE and other central banks to consider issuing their own digital currencies in the near future.
Suffice it to say, most of these central banks have acknowledged that Facebook’s Libra was a wake-up call that prompted them to seriously look into digital currencies.