The Bank of Korea announced on Monday the launch of a pilot program for a central bank digital currency (CBDC).
Though the central bank has no plans to launch the digital version of the won, with the pilot initiative, it will access the logistical barriers of such a digital currency.
The official announcement detailed that the pilot program was launched last month and will run through December 2021.
Getting ready in 22 months
On the one hand, the bank will evaluate the technical aspects of issuing a CBDC, and, on the other, it will also take note of the legal aspects, including the necessary amendments to the Bank of Korea Act.
The 22-month long program has been divided into four major schedules: for the first five months, the central bank will focus on CBDC design and requirements while, from April 2020 until August 2020, the underlying blockchain technology will be reviewed. Business process and analytics consulting will be done from September 2020 until December 2020, and for the entire 2021, the digital currency’s pilot system will be constructed and reviewed.
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The bank, however, made it clear that it does not have any plans to launch a digital currency any sooner as demand for cash is still high in the markets.
The primary motive behind the pilot program is to be ready for a changing market as demand for CBDC might soar in the future.
The Bank of Korea was already studying the area of launching a digital version of its fiat and also put together a task force for the research for launching a CBDC.
Other major central banks are also considering the prospect of researching the feasibility of launching a CBDC.
Similar to the Bank of Korea, Sweden’s central bank also launched a pilot program for a digital version of the krona.
Meanwhile, the former Bank of England governor recently warned against the impact of a CBDC on the existing fiats. Notably, the central bank is a part of a Bank of Japan-led consortium to study a CBDC.