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The Korea CBDC testing program is in a more advanced stage which encompasses the application of real-world functionalities.
The Bank of Korea has successfully concluded the first phase of a central bank digital currency (CBDC) simulation project, according to reports. Back in December 2021, the country’s central bank wrapped up phase one via a series of tests. These included activities like issuing and distribution in a cloud-based simulation environment. Furthermore, according to the same report, the CBDC initiative – which began in August, performed normally under these test conditions.
Following this, the Bank of Korea said that the second phase of the CBDC mock testing is currently afoot. Part of the test process for phase two is a range of functionalities that are commonplace in the real world. Some of these include cross-border remittance, retail payments, and offline payments. As the East Asian central bank put it:
“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 purpose of this is to ascertain how the CBDC would fare using the necessary technology for its actual use. In addition, the Bank of Korea is also interested in accepting assistance from financial institutions for its second phase testing. This strategy is similar to how China is handling its digital yuan, or e-CNY. However, one noticeable difference between the two Asian CBDCs is that the Korean version will emphasize on user privacy.
Upon completion of the second phase in June 2022, South Korea’s central bank intends to initiate a comprehensive evaluation of the project. This includes mapping out its official launch in tandem with ongoing usability experiments with financial institutions.
The CBDC Initiative in Korea Is One of Many to Emerge in Recent Years
Back in July 2021, the Bank of Korea chose Ground X for the creation of its CBDC pilot program. Ground X, the blockchain subsidiary of South Korea tech giant Kakao, has served as a platform for the CBDC.
The issuance of CBDCs is becoming more popular among central banks all over the world. Apart from the Bank of Korea, and the People’s Bank of China, other examples include Bank Negara Malaysia, and the Central Bank of Nigeria. The drive to put out a digital form of national currencies draws inspiration from the age of digital currencies as they become more popular. According to data from the Atlantic Council, 91 countries are currently in various stages of their CBDCs. Of this, only 14 have reached the pilot phase.
South Korea reportedly first began working on its CBDC program in 2020. Furthermore, the East Asian country recently asserted that it intends to become a major player in the emerging metaverse.
At the moment, China is still one of the leading countries in CBDC matters. However, many Asian and European nations are looking to bridge that gap.