The Central bank of South Korea - Bank of Korea (BOK) has set-off its pilot project to accelerate its efforts to launch its Central Bank Digital Currency (CBDC) amid the coronavirus pandemic.

The preparations of the pilot project had been started in March and will continue till the end of 2021 which roughly has been estimated as 22 months. Though there is currently no demand for CBDC in South Korea, it wants to gain momentum in this project following the footsteps of Japan, the US and China, and France.

As per its public statement, the bank wants to be well prepared in advance for the future. During the period, the project will be evaluated in technical terms and possible legal complications while converting the physical cash with the digital equivalent.

The project will also test design, operation method and the blockchain application of the digital currency.

The Schedule for the Pilot program:

March 2020 – July 2020 (Roughly 5 months) - Design of the CBDC and relevant requirements.

April 2020 – August 2020 (Roughly 5 months) – Evaluation of technological aspects.

September 2020 - December 2020 (Approx. 4 months) -Analysis of Business process and consultation

January 2021 – December 2021 (Approx. 12 months) – Construction and test of the CBDC system.

 Korea Aligning with other Nations to launch CBDC

So far, South Korea has been watchful towards other top nations which are pressing hard to launch their CBDCs.

Looking at the progress of other countries, China is the foremost runner that intends to launch its centralized digital currency by the end of this year. The pilot project of France is also in progress to convert its fiat currency Euro into digital currency.  

Sweden’s pilot project e- Krona is also in the midway. The US too has been positive towards the launch of CBDC. Several other countries as well are evaluating the feasibility of digital currency for their countries.

The European Central bank has also intensified its evaluation of the consequences of the euro CBDC. Japan has reportedly drafted a proposal to digitize its currency.  

In the US, apart from the campaign run by former regulatory chiefs and other influential entities supporting the digital dollar, The US government is affirmative towards the digitization of the dollar.

 Research has been going on about how to combat Facebook’s proposed digital currency Libra by the digitization of the dollar.

South Korea ahead in combating the COVID- 19 Crisis 

The digitization projects of most of the countries have been intensifying as studies have proven that the COVID-19 virus can be active on paper currency for several days. Though the research has not been gained official recognition, the possibility cannot be ignored.

So far, South Korea has done the highest number of corona tests in the world. The number has been as high as 295,000 with 8500 positive cases and 81 deaths. The fatality rate has been very low in South Korea due to its strategic handling of the crisis.

The CBDCs are considered a feasible option to minimize the risk of the spread of coronavirus. Cross border payments can be done instantly with least contamination.

Jayashree Ingle

CBW - External Analyst

INDIA