The Bank Of Korea has effectively concluded the pilot testing of the issuance and distribution of their digital currency. It has also gone to state that BOK will have the central bank digital currency testing program ready by June of 2022. The Bank of Korea has wrapped up the principal phase of its two-part mock testing of the Central Bank Digital Currency in December itself. BOK has now moved onto its subsequent stage after concluding the testing of the first stage “smoothly”. This first phase of testing has started in the month of August last year.
Only after the conclusion of teh second stage of testing, BOK will be able to start distributing and launching the CBDC by commercialising the same. In the first phase of testing, BOK had tested certain basic functionalities of the digital currency, mainly issues around the distribution and issuance of the currency. The first stage also was concerned with problems encountered while manufacturing the Digital Currency and running it in a simulation environment before launching this new form of money.
Plans Of Implementing Other Functions
Bank Of Korea expressed interest in expanding the scope of the CBDC after final completion of the first-stage testing. It aims to expand by incorporating and cooperating with financial institutions.
“We will confirm the possibility of operating various functions, such as offline settlements, and the application of new technologies, such as one intended to strengthen privacy protection during the second phase of the test,” the BOK mentioned in their official press release.
After the results of the first phase of testing, BOK also specified its plans of incorporating other plans such as offline payments and also including personal information protection enhancement technologies.
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The second phase of testing will now study and assess all the necessary technology which will be required for its final launch. This mainly will include wiring and payment in an offline environment along with testing cross-border and trading of the CBDC. Post the completion of the second phase of testing, BOK would be carrying out an inspection by conducting usability research in conjunction with financial institutions.
Several other banks such as People’s Bank of China, the Central Bank of Nigeria and Bank Negera Malaysia have also embarked on their vision of introducing their digital form of national currencies.
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Potential Side-Effects Of CBDC
It is important to remember that the CBDC’s have their own set of side-effects which will be brought to the open once the currency is finally launched.
South Korea’s Central Bank expressed that CBDC’s might never be the way of replacing fiat currencies but at best can be used for savings in the bank.
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The Federal Reserve is also of the same idea as it had previously stated that it is best to get it right than be the first to launch such digital currencies. It can be beneficial in individual transactions but could take away America’s financial stability.
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