South Korea is set to launch a real-world trial of its central bank digital currency (CBDC) this month, marking a significant step toward a digital financial infrastructure.
The Bank of Korea, in collaboration with the Financial Services Commission and the Financial Supervisory Service, will oversee the pilot, which involves 100,000 consumers and seven commercial banks issuing deposit tokens for digital payments.
The test will run for approximately three months, during which time participating consumers will be able to transact using deposit tokens at merchants, including convenience stores like 7-Eleven, bookstores such as Kyobo Book Centre, and delivery service Ddaenggyeoyo. Consumers can apply for deposit tokens with a cap of 1 million won (around $688) and will use QR codes for transactions.
Major Banks and Institutions Involved
The seven banks involved in the pilot include KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, Industrial Bank of Korea, and Busan Bank. These institutions will issue deposit tokens linked to the CBDC, allowing users to purchase at designated retailers.
A Bank of Korea official acknowledged the complexity of coordinating the trial, stating, “The goal is to begin the test by early next month at the latest. Since it is an issue that requires cooperation with multiple organizations, there is a possibility that the schedule will be delayed.”
The trial aims to evaluate the technical and practical feasibility of a CBDC-based payment system. It will assess whether the process of banks issuing deposit tokens, consumers making purchases, and merchants receiving payments operates seamlessly.
South Korea has been planning a large-scale CBDC test for several years. Initial trials were expected to occur at the end of 2023 but were postponed to 2024 due to logistical and institutional coordination challenges.
In November 2024, the Financial Services Commission suggested the pilot could also support a digital voucher management platform, allowing the government to distribute and track vouchers. However, the commission did not specify a timeline for implementing this feature.
A Bank of Korea representative highlighted the broader objectives of the CBDC initiative, stating that its introduction could enhance financial inclusion, lower payment service fees, and improve transaction efficiency. However, the official cautioned that the new technology might face security and practical implementation limitations.
International Attention and Implications
The international financial community is closely monitoring South Korea’s CBDC trial. The European Union and other nations conducting similar experiments are expected to assess the results of the pilot.
Cecilia Skingsley, Director of the Innovation Hub at the Bank for International Settlements (BIS) and former Deputy Governor of the Bank of Sweden, commented in November 2023, “BIS looks forward to learning from the experience of directly implementing a CBDC project in a developed and digitalized economy like Korea. The results of this project will receive attention worldwide.”
In preparation for the trial, the Bank of Korea has expanded its internal digital currency research division. The newly formed Digital Currency Research Lab will analyze test results and address any technical or regulatory challenges that emerge during the pilot.
If the trial proves successful, discussions regarding a full-scale CBDC rollout in South Korea are expected to accelerate. However, financial authorities emphasize that additional adjustments may be necessary before widespread adoption. The Bank of Korea and regulatory bodies plan to continuously refine the project based on insights gained from the test.
