South Korea's central bank yesterday announced the launch of a pilot plan to test the feasibility of its own digital currency to replace its current payment systems.
Although the Bank of Korea explicitly states that it has no plans to issue the digital currency immediately, as there is still a significant demand for cash, it does not rule out the possibility of creating one. This pilot test will ensure that the bank is ready to launch a digital won in case market conditions indicate so.
The Bank of Korea begins the pilot test of its CBDC
The Bank of Korea announced in a press release that it launched a 22-month pilot of a CBDC for the country. The main objective of the program is to test the technology and legal requirements for a digital Won.
The pilot plan started last month and will continue until December of next year. The first five months, from March 2020 to July, will involve identifying a possible design for the digital award.
This will be followed by analysis of the technology required for a CBDC for another five months. The construction and testing process of the CBDC pilot system is expected to run from January 2021 to December of the same year.
However, the central bank insists that there is no need for a digital Won at this time. But if "Market conditions at home and abroad change rapidly", will be well prepared.
Other countries are on the way to launch their own CBDC
In particular, central banks are increasingly exploring digital currencies. The Bahamas launched a pilot test for its digital currency known as Sand Dollar in December last year.
But, China was the first major economy to announce its efforts with a digital Yuan. The People's Bank of China is still continuing to develop this digital currency and has actually made it its top priority this year.
Sweden's central bank Riksbank announced in February this year that it had already started a one-year pilot program for e-krona.
Reports have also revealed that Bank of Japan leaders have held a couple of meetings with the Financial Services Agency (FSA) and the Ministry of Finance to discuss how a CBDC would affect the country's economy.
It was also recently reported that a Bank of England executive said it was very important for BOE and other central banks to consider issuing their own digital currencies in the near future.
Suffice it to say that most of these central banks have recognized that Facebook's Libra was a wake-up call that led them to seriously study digital currencies.