Talk of CBDCs may have taken a back seat for many world central banks right now. Yet, despite claiming there was no reason for one just a couple of months ago, the Bank of Korea has unveiled a 22-month pilot plan.
Bank of Korea About Turn on Digital Currency
It seems as if the Bank of Korea has done an about-turn on the importance of a CBDC. Despite its skeptical stance in early February, bank execs have now decided to adjust their plans for the issuance of a Korean CBDC. It will be following steps similar to those laid out by Japan and the United States according to the Korea Times report.
Rather than take a full-steam-ahead approach to a national digital currency, the Bank of Korea (BOK) has been rather more concerned about how a digital WON would destabilize the financial system in the country.
Whether the ongoing coronavirus pandemic and looming economic threat are factors at play are uncertain. But for now, the BOK is ready to try out tests over 22 months to see how well a digital currency can replace paper money. Among other factors, the bank will be checking the technical issues encountered during the pilot.
Korean Approach Reflects Stance of Major Developed Countries
This approach by the BOK looks a lot more like that of other world powers including the United Kingdom, Japan, the U.S., and Canada. A BOK official commented:
The U.S. and Japan had had no plans to issue a CBDC in the near future, but they changed their stance recently to enhance research in the emerging area.
South Korea is not the only large economy to begin taking digital currencies seriously. In fact, the bank joins in with at least six major Western banks that have formed a joint research group in January of this year.
The main player on the Asian continent is China, who announced that developing a CBDC was a top priority last year. Although, no date for its launch has been given as of yet. The BOK official added:
The BOK also decided to remain proactive in the rapid shift in payment environments here and abroad, so we are going to set up the CBDC pilot system and check technical and legal issues surrounding its introduction here.
While the commitment to a pilot project is a step forward for South Korea, the central bank maintained that the shift would not happen in the near future. This is because there is still a heavy reliance in the country on cash for many payment service markets.
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