A real transaction test of Central Bank Digital Currency (CBDC) targeting 100,000 financial consumers is expected to be conducted as early as this month. Test participants are expected to use deposit tokens issued by commercial banks based on CBDC to purchase goods at various merchants, including convenience stores and cafes.
◇ CBDC payment at convenience stores… Seven banks, including Shinhan and Hana, participate
According to a report by ChosunBiz on the 11th, the CBDC real transaction test being promoted by the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service is set to start this month at the earliest. A Bank of Korea official noted, "The goal is to start the test at the beginning of next month at the latest," adding that, "There is a possibility the schedule may be delayed as it requires cooperation with several institutions."
CBDC is an electronic form of currency issued by the Central Bank, which holds the same value as existing cash. The Bank of Korea has been conducting extensive research and experimentation on CBDC since 2021. This real transaction test was originally scheduled for late last year but was postponed to this year due to coordination processes with participating institutions.
During the test, the following stages will be checked to ensure they operate smoothly: ▲ banks issue deposit tokens with digital voucher functionality, ▲ consumers use them to purchase items at payment locations, and ▲ payments are made to the merchants. The test will last approximately three months and will involve seven banks, including the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup), as well as Industrial Bank of Korea and Busan Bank.
Consumers participating in the test can apply for deposit tokens issued by the respective bank within a limit of 1 million won. They need to present a deposit token-specific QR code using an electronic wallet at the merchant. Currently confirmed payment locations include convenience store 7-Eleven, bookstore Kyobo Book Centre, delivery app "Ddaenggyeoyo," and "Seoul Youth Culture Pass," among others.
◇ EU and others pay attention to test results… BIS: "Global interest"
Ahead of this test, the Bank of Korea expanded its internal organization and strengthened support. The CBDC tasks, previously managed by the Digital Currency Research Department within the Financial Payment Bureau, have been reorganized into the Digital Currency Research Office, and related personnel have also been increased.
If this experiment concludes successfully, discussions on the Bank of Korea's CBDC introduction are expected to gain further momentum. However, there may be a need for additional adjustments during the review process regarding practical utility and security. The Bank of Korea and financial authorities plan to assess the practical applicability and economic impact of CBDC through this test.
Countries, including the European Union (EU), where CBDC-related experiments are underway, are also paying attention to this test. In November 2023, when the practical test plan was announced, Cecilia Skingsley, Director General of the Bank for International Settlements (BIS) and former Deputy Governor of the Sveriges Riksbank, remarked, "BIS looks forward to learning from experiences of conducting CBDC projects in developed and digitized economies like Korea," adding, "The results of this project will garner global attention."
A Bank of Korea official said, "If CBDC is introduced, payment services will improve, resulting in lower transaction fees and enhanced financial inclusion compared to before," noting, "However, as a new technology, there might be limitations in terms of practicality and security, so we plan to continuously improve based on the results of this test."