South Korea is gradually exploring the Web3 ecosystem
The BoK is said to have been working on its CBDC since 2020
The trial will test if CBDC can be a payment alternative
Payments will be made via QR code at partner stores
Photo Credit: Pixabay/ Big_Heart
South Korea's central bank is set to launch CBDC trials for real-world transactions under the “Digital Test Project Hangang,” according to local reports citing BoK officials. The three-month programme is said to involve seven banks and 100,000 participants that will be testing blockchain technology's role in finance. The BoK reportedly sees this large-scale pilot as an opportunity to assess whether the Digital Won CBDC can help reshape the country's fintech ecosystem.
Starting in April, trial participants can convert their bank deposits into “deposit tokens,” with individual holdings capped at KRW 1 million (roughly Rs. 59,000) and a total limit of KRW 5 million (roughly Rs. 2.95 lakh) throughout the pilot, according to a Korea Times report. Later this month, the Bank of Korea (BoK) is said to release guidelines for joining the trial.
To launch the pilot, the BoK will issue its CBDC to banks, which will then distribute deposit tokens to participants. These tokens can be used for payments at select stores and merchants, Business Korea report a claimed. Payments will reportedly be processed via QR codes at affiliated stores.
By the trial's end, the BoK aims to gain deeper insights into the applications of Web3 technologies, as per the reports. It will assess whether CBDCs can serve as an alternative to traditional payment systems, streamline financial transactions by reducing intermediaries, and lower transaction costs.
The pilot is likely to wrap up in or after June.
Central Bank Digital Currencies (CBDCs) are blockchain-based digital versions of fiat currencies. In South Korea, one CBDC token will be equivalent to KRW 1 (roughly Rs. 0.059). Like cryptocurrencies, CBDCs enable fast transactions and maintain permanent records on a blockchain. However, unlike cryptocurrencies, they are issued and regulated by central banks. Countries such as India, China, and Japan are also developing their own CBDCs to enhance financial transparency and reduce reliance on cash.
Between 2022 and 2023, South Korea reportedly conducted a CBDC trial for wholesale transactions and introduced a blockchain-based digital voucher system, enabling smartphone access to public welfare services.
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