South Korea’s central bank has announced that it has launched its digital currency pilot program. Although the bank of Korea has no immediate plans to introduce its CBDC, it is launching this pilot program to assess the logistics of issuing it. The project is to ensure that the central bank is well prepared to issue its CBDC in the face of changing market conditions.

The central bank initially conducted a theoretical research on CBDC in February 2020 and its now rolling its pilot program. The testing will comprise a technological and legal review of CBDC issuance. The pilot program which started in March is scheduled to run for 22 months and end on December 2021.

The initial phase of the program will run for 5 months and the main activity is to define the requirements and design of the CBDC. The second phase, which will be overlapped by the first phase will begin from April through to August. It will involve of the technology required to implement the CBDC.

This will be followed by a third phase which will last until the end of 2020, where there will be an analysis of business processes. The final phase will run through the whole of 2021, where there will be building and testing of the CBDC pilot system.

More importantly, the Bank of Korea stated emphatically in the announcement that the bank does not see an immediate need to release a digital currency in the country. However, it is doing this pilot project based on other nations’ research in the field, and so it wants to get prepared in case such move becomes necessary. The bank expressed this as:

“The need to issue a CBDC in the future still remains slim when considering the demand for cash that still exists, the competitive payment service market and high-level financial inclusion, but there is a need to be able to quickly take steps in case market conditions at home and abroad change rapidly”.

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