Isabella García
The Bank of Korea (BOK) is set to begin pilot trials for its central bank digital currency (CBDC) between April and June, according to a local media report.
Codenamed “Hangang,” the trial will include 100,000 participants and involve seven major South Korean banks, such as KB Kookmin, Shinhan, Hana, and Woori Bank.
How the CBDC Pilot Will Work
During the pilot program, participants will have the ability to convert their bank deposits into tokenized digital deposits. These funds can then be used for purchases at local merchants, including:
- Convenience stores
- Cafés and restaurants
- Supermarkets
- Online retailers
The mobile banking apps of participating banks will support these transactions through QR code-based payment systems.
Evaluating Blockchain for Banking Settlements
The primary objective of the trial is to assess whether distributed ledger technology (DLT) can effectively replace the existing bank settlement system, which currently depends on central bank reserves.
A BOK official highlighted that tokenized deposit payments could reduce intermediary involvement, allowing merchants to receive payments instantly, streamlining financial transactions.
Deposit Limits and Conversion Back to Cash
Each participant in the pilot will be subject to a one-million-won ($689) holding limit for tokenized deposits. However, they will have the option to top up their balance to a maximum of five million won.
Additionally, users will be able to convert their digital deposits back into cash, ensuring flexibility within the system.
BOK’s Stance on Bitcoin Reserves
While South Korea is actively exploring digital currency innovations, the Bank of Korea has clarified that it has no plans to include Bitcoin in its foreign exchange reserves.
The BOK cited IMF guidelines, stating that Bitcoin does not currently meet the required criteria for official reserve holdings.
“However, we will closely monitor ongoing discussions, especially those within the IMF, regarding the potential inclusion of virtual assets in foreign exchange reserves,” a BOK representative told PRIME.
As the CBDC trial unfolds, financial experts and regulators will be watching closely to determine its potential impact on South Korea’s digital economy and banking infrastructure.
