South Korea is currently making a crucial stride in the digital currency sphere as a commitment in the space of central bank digital currencies (CBDCs). In the latest report, the country has earmarked three potential regions for pioneering its CBDC pilot, bypassing the nation’s capital, Seoul.
The Bank of Korea, the country’s central banking authority, is charting new territory by laying out a plan to issue and distribute a digital version of its national currency. This move could alter the dynamics of the country’s financial sector while making strides in the global race to digitize national currencies.
Shortlisted Regions For The CBDC Pilot
The Bank of Korea has shortlisted Jeju, Busan, and Incheon as potential testing grounds for its CBDC, according to reports from a local South Korean media outlet. The bank made the revelation on July 31, excluding the bustling metropolis of Seoul from its list.
This selection sets the stage for these three regions to become the country’s “private target CBDC test bed.” Although the Bank of Korea will eventually select one region for the pilot phase, according to the same report.
Related Reading: South Korean Private Banks Explore Alternatives To Private Stablecoins And CBDCs
The chosen region will experiment with public-level payments and distribution while also procuring franchises that could process payments through CBDC.
An official at the bank said in the report:
The CBDC e-wallet wallet (app) will allow not only residents of the area but also a large number of civilians, including tourists, to open [use] them.
Replicating Local Currency Distribution Models
The regional closed tests of the CBDC by the Bank of Korea will follow a model similar to the current local currency scheme implemented in various South Korean regions. This local currency scheme, introduced as a fundamental earnings and financial aid remedy amid the COVID-19 pandemic, is currently used in Jeju, Busan, and Incheon.
These regions issue and distribute their own local currencies, namely ‘Tamranjeon’, ‘Dongbaekjeon’, and ‘Incheon e-Eum’. According to a commercial bank official in Korea, the choice for the pilot was “greatly inclined” toward Jeju, which boasts the second-largest population due to the sheer number of eligible citizens in Busan reportedly burdening the Bank of Korea in numerous ways.
The official stated:
In the case of Busan, the number of target citizens is too large [that] the Koreans are [overburdened] in many ways, so the opinion has been greatly inclined to Jeju, which has a large population. At present, the decision of the final candidate [city] has been temporarily postponed due to internal issues of the Korean banks.
The CBDC, if successfully tested, could potentially reshape the financial landscape, providing citizens and tourists alike an opportunity to experience first-hand the shift to a digital economy.
While CBDCs pose more “technical barriers” than the local currency scheme, according to local reports, the successful implementation of this pilot project could set a precedent for other countries looking to introduce their own CBDCs.
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