While the CBDC testing is scheduled for next year, the road to CBDC implementation is not without its challenges.
The Bank of Korea (BoK) is making headway in its quest to develop and test its central bank digital currency (CBDC). According to a new report from the country’s local news outlet, the bank has selected three regions for the “private target CBDC test bed” outside Seoul, the capital of South Korea. The chosen cities for the closed CBDC pilot program are Jeju, Busan, and Incheon.
The BoK’s plan includes selecting one of these regions for further experimentation, involving public payments and distribution, as well as establishing franchises capable of accepting CBDC payments. The bank teamed up with the electronics giant Samsung to work together to build a platform that will enable offline payment of CBDC.
According to a commercial bank official in Korea, the number of eligible citizens in Busan is reportedly substantial, leading the bank to face several challenges. As a result, the bank’s preference leaned significantly towards Jeju, which boasts the second-largest population among the selected regions.
South Korea to Allow Tourists to Use Its CBDC For Payments
The closed tests of the CBDC program in Jeju, Busan, and Incheon are expected to mirror the issuance and distribution structures of their existing local currency schemes.
Each region’s local currency, such as “Tamranjeon” in Jeju, “Dongbaekjeon” in Busan, and “Incheon e-Eum” in Incheon, has been a vital economic stimulant during challenging times like the COVID-19 pandemic.
However, the CBDC’s ambitions go beyond being just a local currency alternative. The Bank of Korea envisions its CBDC electronic wallet app to cater not only to South Korean residents but also to tourists and civilians, transforming the payment landscape and fostering financial inclusion.
“The CBDC electronic wallet app will allow not only residents but also many civilians, such as tourists, to [partake],” an undisclosed bank official told the local news media.
South Korea in Need of IT Experts to Support Its CBDC Program
While the CBDC testing is scheduled for next year, the road to CBDC implementation is not without its challenges. The bank acknowledged that the central bank-issued currency has much more significant technical barriers that need to be overcome than traditional currencies.
During preliminary tests, the CBDC mock system faced processing speed issues compared to major domestic micropayment operators. According to the report, addressing these concerns will be crucial for the CBDC’s successful adoption in real-world scenarios. Speaking to the news media, an official from the IT industry in South Korea disclosed that the country would require more human resources from the IT sector to support its CDBC plan.
“As the Bank of Korea is planning a large-scale retail payment system project soon, it is in need of an exceptionally large number of IT personnel. A large number of related personnel, including large companies, are on the move,” said the expert.