South Korea’s Digital Won Project Sees First Trial Stage Completed

In a press release issued on Monday, the Bank of Korea (BOK) said that it has completed the first stage of its Central Bank Digital Currency (CBDC) or Digital Won trials.

Many central banks worldwide are reconsidering the use of fiat currencies in their economies as the financial revolution is taking centre stage across the board. South Korea ranks as one of the most developed Asian economies exploring the launch of a CBDC, with the country setting up a panel to accelerate its CBDC pursuit as far back as June 2020. 

As reported by the Yonhap News Agency, the first trial was launched back in August 2021 and completed in December, with the result revealing that the CBDC showed normal operations in a cloud-based environment. 

While the milestone recorded in the just concluded first trial stage is significant to the development of the Digital Won, the apex bank said there are more functionalities to test out in the second stage.

“We will confirm the possibility of operating various functions, such as offline settlements, and the application of new technologies, such as one intended to strengthen privacy protection during the second phase of the test,” the BOK said in a press release. 

The second phase of the trial is billed to commence right away and is expected to span until June 22 this year.

While no Asian central bank has officially launched a CBDC to date, the People’s Bank of China (PBoC) can be credited for developing the world’s most sophisticated CBDC to date. The country’s e-CNY project has been in advanced testing for a very long time. The PBoC has notably developed a digital wallet for the new legal tender accessible on Chinese-focused Google Play Store and Apple’s App Store, respectively.

The timeline for the launch of the e-CNY is not yet known, but the CBDC is drafted to be used at this year’s Beijing Olympics games by foreign athletes.

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Bank of Korea Initiates CBDC Pilot Plan on Samsung Galaxy Smartphones

Bank of Korea has announced a pilot plan to launch its CBDC (Central Bank Digital Currency) through the Galaxy smartphones of Samsung Electronics, a South Korean multinational electronics company.

The Central Bank of South Korea is looking to offer CBDC as an alternative for physical currency. The Central Bank started its pilot program on June 28, 2021which is planning to test the practicalities of digital payments using Galaxy smartphones.

Unnamed bank executive at Korea’s Central Bank stated that the pilot program aims to assess whether it is possible to carry out the transfer of funds (payment remittances) through mobile smartphones using the CBDC with no availability of internet connection or to send the digital currency payments to other mobile smartphones or other connected bank accounts.

The pilot program will run into two phases. The first phase will run until December this year to examine the technology’s suitability. On the other hand, the second phase, which is expected to run from January until June next year, will explore the practicalities of real-life transactions and settlements of the CBDC.

Suppose the Bank of Korea’s pilot program succeeds. In that case, South Korea will be one of the first nations to provide a CBDC alternative to services like Google pay and Apple pay, which enable contactless phone payments without the need for an internet connection.

Making Cryptocurrency Trading Easier 

Blockchain has immensely entered the business world, with almost every business and industry niche proving it practically impossible to overlook the importance of this technology.

As a result, various startups and established brands have entered the blockchain landscape, with Samsung, based in South Korea, taking the lead. The electronics giant company took multiple steps towards developing its presence in the blockchain market.

Since 2019, Samsung has been integrating crypto assets into its smartphone hardware. The company started with the S10 model with its built-in cryptocurrency wallet. The S20 model followed it in 2020, which expanded the storage for private cryptocurrency keys in its Galaxy model devices. Samsung introduced a wallet that enables users to store cryptocurrencies such as Bitcoin and others on their devices and make contactless payments using crypto assets.

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South Korea Seeks Tech Partner to Build the Pilot Program for CBDC

According to a Reuters report, South Korea’s central bank on Monday said it would choose a technology supplier to build a pilot platform for a digital currency, moving a step closer to creating a central bank-backed digital currency.

South Korea, through its apex financial institution, the Bank of Korea, is seeking a technology partner to help advance its pursuit of a Central Bank Digital Currency (CBDC). 

The pursuit of a CBDC amongst major economies has taken a new leap in 2021. The United Kingdom and the US have now officially joined the rally that picked momentum with the COVID-19 pandemic. The pursuit of these new forms of money across the board is backed by realising that cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and stablecoins are gaining traction in global payment systems. Central Banks are jostling to debut their own digital currency to keep fiat currencies relevant in today’s digital world.

The Bank of Korea said it would choose the tech partner based on an open bidding process. The exercise’s primary aims will be to research the practicalities of launching a central bank digital currency (CBDC) in a test environment. 

“The share of cash transactions are decreasing significantly,” a BOK official told a news conference. “The steps we are taking now are to prepare for the changes in the payment settlement system, changing rapidly.”

The test program, which is billed to span from August to December this year, is expected to see the simulations of central banks and retail money outlets. According to the Bank of Korea, the trials will include payment via mobile phones, fund transferring and making deposits.

Other prominent Asian countries with active CBDC pursuits include China, Hong Kong, and Japan. China is leading the race as the country has entered into the retail/commercial testing phase for its Digital Yuan program.

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Bank of Korea Planning Mock Test to Trial CBDC Functionality

The Bank of Korea (BOK), South Korea’s Central bank is looking to research the usefulness of launching a central bank digital currency (CBDC) through a mock test, although the apex bank is not keen on issuing a sovereign digital currency. 

BOK Testing Potential Use of Digital Won

According to Yonhap News on Monday (April 24, 2021), the BOK revealed plans to trial the functionality of a CBDC. The South Korean central bank will specifically check if a digital currency can be used to purchase goods and services, and also be used for settlement and remittances.

Also, the BOK stated that it is looking for an operator that would conduct the mock test. According to the apex bank, it would choose the operator through a bidding process.

South Korea has been conducting extensive research on a potential digital won. Back in April 2020, the BOK began a pilot program to look into the technicalities of issuing a CBDC. The pilot program which is supposed to last for 22 months, started in February 2020 and ends in December 2021.

The BOK later set up a committee to research any regulatory obstacles for a potential digital won. As reported by BTCManager back in February 2021, the central bank published a book regarding CBDCs.

While the South Korea bank is carrying out experimental exploration of CBDC protocols, the BOK reiterated that it does not have plans to create an actual digital won. However, in March, the BOK governor said that the demand for bitcoin will reduce when countries launch sovereign CBDCs. Meanwhile, the planned mock test is expected to start in August 2021 and end in June 2022.

CBDC Continue to See Increased Interest

More central banks continue to join the CBDC race, with some more progressive than others. China has been carrying out multiple digital yuan tests in different parts of the country. Most of these digital yuan tests have come in form of airdrops.

China’s central bank is also planning to trial its CBDC with international visitors and athletes at the upcoming 2022 Winter Olympics in Beijing.

Other central banks from countries like Norway, England, and Japan are carrying out CBDC research and experiments, with Canada also making plans to launch its digital currency. Earlier in May, Isreal’s apex bank published a working paper for a potential CBDC project.

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Bank of Korea wants to monitor crypto trading activity, cites monetary risks

The Bank of Korea reportedly has plans to maintain strict oversight on crypto trading activity via real-name bank accounts.

According to a report by The Korea Herald on Thursday, the BOK is seeking authority under Article 87 of the country’s central bank Act, stating: “We plan to utilize our legal authority over requesting document submittal from financial institutions to monitor the volume of cryptocurrency transactions made through bank accounts.”

The above comments are reportedly from documents submitted by the BOK to lawmakers in the country with the central bank wary of unlawful crypto transactions causing significant risks to internal monetary control policies.

According to a BOK official, the central bank’s crypto monitoring regime could begin in September if approved by lawmakers.

The BOK’s request for powers to police crypto trading volume activity comes on the heels of financial regulators in the country demanding a full audit of banks that deal with cryptocurrency exchange clients.

As previously reported by Cointelegraph, authorities in South Korea are keen to ensure the complete implementation of the mandatory real-name crypto trading account policy. Indeed, only the “big four” crypto exchanges — Bithumb, Upbit, Korbit, and Coinone — are reportedly adhering to the policy.

Both the Financial Services Commission and the Financial Intelligence Unit are keeping a watchful eye on South Korea’s crypto market. The FSC has even asked its employees to declare their cryptocurrency holdings.

Crypto service providers including exchanges, custodians, wallet platforms, and asset managers, have until September to begin complying with new financial reporting requirements. Companies that fail to adhere to the ruling could see their executives face up to five years in jail.

Despite the tightening of crypto regulations, demand continues to skyrocket in South Korea. Traders are reportedly favoring altcoins with Bitcoin (BTC) volume declining on several exchanges.

South Korea will also introduce a 20% capital gains tax on crypto trading profits above 2.5 million won ($2,230) beginning in January 2022.