South Korea Central Bank to Accelerate Plans for CBDC Usability Testing

The Central Bank of Korea has decided to speed up its Central Bank Digital Currency (CBDC) project and launch a pilot test of the digital KRW this year. According to reports, 100,000 citizens will participate in the pilot test. According to the South Korean Central Bank, the aim is to begin testing usability and deposits as it continues developing its CBDC.

South Korea to Test CBDC by Programming Deposit Tokens

A local report has stated increasing interest in the Korean CBDC, especially about how the digital KRW will affect financial firms operating in South Korea. Sometime in the fourth quarter of 2024, the Bank of Korea will begin distributing deposit and e-money tokens to up to 100,000 citizens who will participate in the pilot. The bank hopes to test the project’s functionality among ordinary citizens to properly determine utility. Part of the test is to program the digital KRW. The central bank intends to issue deposit tokens that can function as digital vouchers so holders can use them for specific purchases at predetermined locations.

The Bank of Korea’s plan for usability tests was disclosed in October last year. At the time, the apex bank revealed it would conduct the test with regulatory agencies, including the Financial Supervisory Service and the Financial Services Commission.

The Central Bank’s plan is to simplify the process of financial transactions as much as possible. While citizens can transfer funds and make payments via online banking channels or card transactions, the CBDC can streamline this process, supporting fund transfers without third parties or intermediaries. The simplification reduces the transaction costs and also improves efficiency. Nonetheless, the likelihood that the Bank of Korea will develop a CBDC that complements traditional financial institutions is high.

New CEX Rules

As South Korea continues its research and development efforts on the CBDC, the country is bearing down on cryptocurrency exchanges. New rules set for implementation in May provide a few restrictions for centralized crypto exchanges operating in the country. For instance, crypto exchanges will be barred from listing tokens involved in any exploits. The only exception is tokens that have undergone extensive investigations and have adequately resolved the problems. In addition, tokens listed by CEXs must publish whitepapers or technical manuals with extensive details. These documents must be specifically written for users in South Korea. While exchanges must not trade any tokens that do not meet these requirements, the laws may not apply to tokens that have traded on licensed CEXs for more than two years.

The new rules give authorities the power to order the delisting of cryptocurrencies that do not meet these criteria. Authorities will also hold the exchanges responsible for ensuring that the issuers adhere to the rules and provide adequate information on their tokens. Currently, South Korean agencies are getting feedback from local CEXs about the new regulations before implementation.

The Korean crypto market has recently seen a boom in won-denominated trading over the dollar. Recent research from blockchain firm Kaiko noted that the won was the most traded fiat against crypto in Q1, hitting $456 billion. This was higher than the $455 recorded for the dollar.