South Korea Pilot Digital Currency With 100,000 Citizens
South Korea is taking a major step towards the implementation of digital currency nationwide. In the fourth quarter 2024, a pilot project with the involvement of 100,000 people will be launched by the nation. The Bank of Korea (BOK) and Financial Regulators are jointly managing the project.
Participants in the pilot project will be able to use deposit tokens based on the country’s central bank digital currency (CBDC). Agustin Carstens, the General Manager of the Bank for International Settlements, initially discovered the project in October. It is an advanced version of the BOK’s plan to conduct real-world experiments with CBDCs.
The registration period for participants will begin at around September-October, and three months will be required to complete the project. With the help of digital currency, participants can purchase goods using deposit tokens issued from commercial banks. This works similar to vouchers used in retail stores.
The project has its limitations. The digital currency can only be used for payment, with personal remittances and other uses currently being prohibited. The BOK and Korea Exchange will also conduct technological trials to evaluate the new financial products. The focus of the project is on integrating CBDC in a simulation system for trading carbon emissions to test the transactional feasibility between carbon emission rights and payment tokens.
The BOK has highlighted that digital currency can overcome the challenges of existing voucher systems such as high transaction costs, slow settlement processes, and limitations in post-transaction verifying. The “digital won” project, coined by Agustin Carstens, has gained praise for its future-oriented approach to the monetary system. Under Governor Rhee Chang-yong’s leadership, the BOK is open to conducting separate pilots if banks propose new individual projects.
With the digital yuan adoption being a leading trend in CBDC adoption, South Korea’s successful simulated tests in December 2021 will make it a major player in the global move towards digital currencies. Major cities like Jeju, Busan, and Incheon are likely to have transformative effects on everyday transactions and financial innovations in the future.