One hundred thousand Koreans will be able to utilize deposit tokens based on the central bank digital currency (CBDC) next year, within a pilot program jointly operated by the Bank of Korea (BOK) and financial authorities.
A CBDC is a new form of digital money issued by a central bank.
The BOK, Financial Services Commission (FSC) and Financial Supervisory Service (FSS) announced the plans, following the visit of Agustin Carstens, general manager of the Bank for International Settlements, to the BOK on Thursday. The plans are a developed version of their earlier announcement made in October, that disclosed the central bank’s intention to take real-world experiments on CBDC.
Under the pilot project, 100,000 selected individuals can purchase goods with deposit tokens issued by commercial banks in the form of CBDC, similar to using a voucher at the store. Selected commercial banks will recruit participants around September to October of the following year, and will continue the project for three months.
The BOK explained that the digital currencies have the potential to significantly address challenges with existing voucher systems, such as special grants during COVID-19 and childcare grants offered by the government. The challenges include high transaction fees, slow settlement processes, limitations of post-transaction verification and concerns over fraudulent claims.
However, participants will be restricted to using the currency solely for its designated purpose of payment. Other uses, including personal remittance, will not be permitted at this time.
Additionally, technological experiments will be conducted to evaluate the feasibility and effectiveness of issuing and distributing these new forms of financial products.
Read more at: koreatimes.co.kr