The Bank of Korea launched a Pilot project for Central Bank Digital Currency CBDC amid Corona Crisis


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