South Korea is set to unveil a Central Bank Digital Currency (CBDC). According to Ajo Economy News, ten commercial banks have been selected by the Bank of Korea to test the interoperability of the CBDC between banks. The service will operate on a new IT system that participants in the trials project will integrate into their infrastructure.
The Scope of The CBDC Will Support Direct Transfer of CBDC Tokens
Some of the ten banks selected for the program are Shinhan Bank and NH Nonghyup Bank. The latter has had a friendly-crypto policy for a long time and is one of the few Korean banks that offer Crypto-custody services.
The Bank of Korea aims to promote direct payments and remittances of money between individual users. The intention is to reduce the turnaround time for financial transactions and cut the cost of financial transactions.
The platform can create, issue, and redeem digital tokens. It can also allow users to develop wallets to store their private keys.
The Project Timeline Runs Up to the End of the Year
The CBDC project started last year. Its design concept is an Ethereum-based Klayton permissioned blockchain. The blueprint of the infrastructure is provided by Ground X, a Crypto developer that the bank acquired.
The previous phases incorporated tokenization, zero-knowledge (zk) proof technology, offline payments, smart contracts, and cross-border settlement capabilities. The current phase intends to test these features to ensure that the digital payment system can work within the financial system. The test will culminate in a comprehensive CBDC report that will be ready before the end of the year. The results/findings will pave the way for implementing the new digital currency on a wide scale.
CBDCs Are the Future of Finance
The Bank for International Settlements (BIS) has been advocating for the development of a new digital payment system. CBDCs have consequently been explored, and the BIS has been monitoring the technological developments in this regard.
Some notable CBDCs include China’s e-CNY and Panama’s Sand Dollar. The two currencies are already in operation, and users can carry out transactions such as tax remittances using digital tokens. The e-CNY is already being used in commercial transactions in some cities, such as Shenzhen, where 30 million CBDC was airdropped to vulnerable households for redemption in grocery stores.
The interoperability of the different CBDC platforms is already challenging in implementing cross-border CBDC services. To mitigate the challenge, SWIFT is liaising with Capgemini SE to establish a global platform to support the different networks.
The CBDC technology is burgeoning compared to digital assets like NFTs and Cryptocurrencies. It is an effort by regulators and central banks to discourage using volatile Cryptos.