By
Chimamanda U. Martha
April 22nd, 2024
The Bank of Korea discovered that its CBDC could process up to 2000 transactions per second, which is way below what the standard centralized ledger database offers.
The central bank of the Republic of Korea and issuer of the Korean Republic won, the Bank of Korea (BOK), is reportedly testing its digital currency (CBDC) program on NFT trading and global remittances. According to local media outlet Yonhap News on Monday, the Bank of Korea has successfully completed its second phase of the CBDC pilot program.
Bank of Korea and Its CBDC Tests
The Bank of Korea has been developing a digital currency competent in the global markets. Consequently, the Bank of Korea Governor Chang Yong Rhee noted that interoperability is key to the success of a CBDC. However, some aspects of decentralized technology, such as privacy, may be lost in most CBDCs, according to Rhee.
Moreover, most international banks are regulated under money laundering and terrorist acts. As such, the Bank of Korea is keen to have a highly interoperable digital currency competing globally.
“We have realized that there is no such thing as perfect technology or CBDC designs that can satisfy all the various goals and expectations at the same time,” Rhee said adding that “for instance, the bank made a decision to improve compliance at the sacrifice of privacy.”
According to Yonhap News, the Bank of Korea found that its CBDC could process up to 2000 transactions per second, which is way below what the standard centralized ledger database offers.
South Korea Taps on Blockchain Technology to Open Up Economy
South Korea wants to tap into the fast-developing blockchain technology in a similar version as its neighboring countries, including China. Notably, the Bank of Korea launched a pilot program for a retail CBDC in April 2020. BoK successfully finished the first phase of the pilot in December 2021 and has now completed the second phase.
By partnering with other central banks worldwide, the Bank of Korea anticipates advancing its payment system and increasing financial inclusion. The South Korean government intends to fill the position that digital assets have occupied through stablecoins, among other coins.
Furthermore, digital assets led by Bitcoin do not fulfill the required characteristics to onboard the unbacked in most countries.
Meanwhile, the South Korean government has found a niche in non-fungible tokens (NFT) and CBDCs. Moreover, the NFT market has experienced astronomical growth since early 2021, when Beeple sold one artwork for $69 million.
The use cases for NFTs are wide, including GameFi, metaverse, and also the speculation aspect. Otherwise, every other real-world commodity can be minted as an NFT on a blockchain and traded among users.
Combining CBDC with NFT trading capabilities will give South Korean digital currency an upper hand over its competitors.