South Korea’s central bank is planning to conduct a mock test on the functionality of a central bank digital currency (CBDC), according to reports.
The primary purpose of the test is to check whether the CBDC can serve settlement and remittance for the purchase of goods and services.
The test will begin in August 2021 and will conclude in June 2022. The central bank has yet to pick an operator for the pilot, but will open the opportunity up to bidders. The bank has alluded to CBDC efforts in the past, though this is the most substantive effort to date.
The Bank of Korea also emphasized that it does not necessarily intend to release a digital currency. The goal of the trial run is only to check the feasibility and effectiveness of a CBDC.
South Korea has been taking large steps towards the implementation of cryptocurrencies and related technologies. This includes making several regulatory changes and creating guidelines for the market. The nation is one of the most tech-savvy in the world, and its citizens are already widely familiar with the cryptocurrency market.
With this latest development, the nation now joins several others in taking their economic digitization efforts to the next level. All signs point to a more robust cryptocurrency regulation framework, as authorities have been working on taxation rules and other laws, like the banning of privacy coins.
South Korea follow China and others
Among those nations that South Korea is following are China and Sweden. The former is particularly enthusiastic about a CBDC, which they see as a way to replace and better the many private digital wallets on the market.
China has conducted several pilot programs for its digital yuan in several major cities — all highly successful. The country’s citizens are already well into using digital wallets for everyday payments, and the CBDC is a natural evolution of that process. The government is expected to launch the CBDC at the end of the year.
Sweden, on the other hand, is a newer entrant to the digital asset space. In recent months, the nation has ramped up its e-Krona initiative, with some estimates putting it as far as five years away. Even if it may take longer than expected, the desire to launch the asset is clear.
Two countries that have already launched CBDCs, the Bahamas and Cambodia, have seen some success. PwC ranked these as the top two cryptocurrencies — though the global market will be more keen to see how major economies like China will fare with a CBDC.