South Korea is set to launch a pioneering project involving digital currency in the fourth quarter of 2024. A joint venture between the Bank of Korea (BOK), Financial Services Commission and Financial Supervisory Service, the project will see 100,000 citizens using deposit tokens based on the country’s central bank digital currency (CBDC).
Dubbed the “digital won” project, this ambitious initiative will enable participants to purchase goods using deposit tokens issued by commercial banks. Starting in September or October of the following year, this three-month program will have some restrictions in place, with personal remittance and other uses currently prohibited.
The BOK and financial authorities also plan to evaluate new financial products. One experiment involves integrating CBDC into a simulated system for carbon emissions trading, in order to test the feasibility of transactions between carbon emissions rights and payment tokens.
The project has been praised for its potential to overcome the challenges of existing government voucher systems, such as high transaction fees, slow settlement processes, and issues with post-transaction verification. Governor Rhee Chang-yong is open to conducting individual pilots if banks propose new projects.
China is leading the way in the CBDC adoption space with its digital yuan, but South Korea’s successful simulated tests in December 2021 make it a serious contender. Major cities like Jeju, Busan and Incheon are likely to be pilot locations, opening the door to transformative impacts on everyday transactions and future financial innovations.
