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The Bank of Korea shortlisted three regions for potential CBDC testing next year, and the country’s capital ââSeoul was not on the list.
Jeju, Busan, and Incheon Make the Cut
On July 31, 2023, a local South Korean media outlet shared updates regarding preparations for the launch of the central bank digital currency (CBDC) in South Korea. The government has been working on the South Korean digital won since at least 2020 and has finally scheduled its pilot for the next year.
According to the report, the Bank of Korea has chosen Jeju, Busan, and Incheon as candidates for the “private target CBDC test bed” in collaboration with commercial banks. In other words, one of these three regions will eventually be selected to test the public distribution process and the use of the CBDC as a means of payment.
So far, Jeju has the highest chances of becoming the CBDC pilot site, as one of the bank officials explained:
"In the case of Busan, the number of eligible citizens is so large that the Bank of Korea is burdened in many ways, so the opinion was greatly inclined to Jeju, which has the next largest population."
It was also mentioned that the CBDC testing will be similar to the issuance and distribution structure of the current local currencies. South Korea introduced local currencies as alternative currencies issued by local governments to revitalize the local economies during the COVID-19 pandemic.
All of the three suggested regions for the CBDC pilot are currently issuing and distributing their own local currencies (“Tamranjeon,” “Dongbaekjeon,” and “Incheon e-Eum”). This might be the reason why the Bank of Korea narrowed down these regions and bypassed Seoul.
A commercial bank official said, "The CBDC electronic wallet (app) will allow not only local residents but also many unspecified civilians such as tourists to open. We are in contact with distribution companies such as large supermarkets."
Obstacles for the South Korean CBDC Launch
The report also revealed that unlike existing local currencies, the CBDC system has a lot of technical barriers to overcome. The Bank of Korea tested the payment performance of the CBDC system for about six months last year, and it was found to be inferior to major domestic micropayment operators in terms of processing speed.
An official from the IT industry said, "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,” he explained.
Besides, one of the biggest problems the South Korean digital market has been facing lately is a surge in criminal activities. To combat that, the government announced the launch of a multi-agency investigation unit earlier this month.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.