South Korea has joined a growing number of countries in initiating trial programs for central bank digital currency (CBDC). The Bank of Korea (BOK), the country's central bank, will launch the pilot project to investigate the technical infrastructure for a CBDC.

On October 4, the BOK, the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) jointly announced the CBDC experiment. The initiative, according to the statement, will evaluate the sustainability of a future monetary system based on "wholesale CBDCs."

The pilot will comprise private and governmental organizations, with professional technical support provided by the Bank for International Settlements (BIS). Both retail and wholesale CBDCs will be tested by the BOK.

Banks will tokenize their deposits and circulate them through the network monitored by the BOK, the FSC, and the FSS under the experimental framework of a wholesale CBDC. After the system is set up in Q4 2024, live testing of the retail CBDC should begin.

As is customary with CBDC testing, the BOK emphasizes that the pilot trial does not imply automatic implementation. However, Lee Myung-soon, the FSS's first deputy governor, described the pilot as a step toward the future monetary system:

“The BOK has persistently pursued technological research related to CBDC. This test, building upon past achievements, represents a significant step towards creating a prototype for the future monetary system.“

These statements echo a statement made by one of France's central bank's leading executives on September 3. Denis Beau, the first deputy governor of the Banque de France, described the CBDC as "the catalyst for improving cross-border payments by enabling the build-up of a new international monetary system.” 

Sources:

https://cointelegraph.com/news/cbdc-bank-of-korea-to-start-infrastructure-pilot

https://www.fsc.go.kr/no010101/80844