The Bank of Korea (BOK) is searching for a technological supplier to help develop its own digital currency. The bank had a bidding process for selecting a 10-month technological partner to help build its Central Bank Digital Currency (CBDC). The pilot program scheduled for launch by August is to be part of the process of confirming the workability of the digital cash. Also, the bank added that there are no definite plans for the issuance of digital currency.
BOK Sets to Commence Pilot Program for Digital Currency
The pilot program was allocated a total of 4.9 billion won ($4.4 billion) and is set to commence in a “virtual environment. Additionally, the pilot program is into two stages. The BOK will center the initial stage on exploring and testing the fundamental roles of the CBDC. The financial institution hopes to complete the first phase by the end of the year. The second stage will focus on more intricate concepts such as privacy policies. The central bank said that the second stage would end by June 2021.
The first stage explores the ability of CBDC to be transferred among users. Also, this stage seeks to explore the option that CBDC could be exchanged to fiat currencies. This testing and circulation will be conducted through the public cloud. Furthermore, the second stage will include assessing cross-border transactions and buying digital assets with CBDC and offline payments.
The BOK plans for developing its digital currency come amid the ongoing buzz around CBDCs. Several central banks globally have been working on the creation of CBDCs while some have conducted testing. Some of the countries that have gone far with their CBDC development include Japan and China. China, for example, has issued some of its digital yuan while conducting its testing phase across several cities in the country. Speaking further on the need for the development of CBDC, the BOK stated:
“The share of cash transactions is decreasing significantly. The steps we are taking now are to prepare for the changes in the payment settlement system, changing rapidly.”
BOK Seeks Tech Partner on CBDC Development
Earlier this month, Renowned tech industries Naver and Kakao showed interest in the pilot program partnership. Their blockchain units Naver Financial, Line Plus, and Kakao’s Ground X have seemingly prepared task forces for the bidding process. LG CNS, a global IT service, is reportedly taking an interest in the partnership. At the same time, Samsung SDS, a subsidiary of Samsung Group, had not indicated interest as of early May.
Back in February, the BOK published a CBDC affiliated book, speaking on plans to test the distribution of a digital currency and detailing the legal challenges involved with a state digital currency.
“We are launching the pilot test to see how CBDC could be used as a form of safe assets when the share of cash transactions decline significantly,” a BOK official said, noting the importance of the digital won.