South Korea’s monetary policy regulator is taking steps to create its own digital coin. The Bank of Korea is now looking for technology providers to develop a test environment for the project. Previously, major commercial banks expressed doubts about cooperation with domestic cryptocurrency exchanges.
The Central Bank of Korea will launch a CBDC pilot platform
The Bank of Korea announced on Monday that it will select technology suppliers through an open tender process. Its mission will be to establish a pilot platform to launch the Central Bank of Korea Digital Currency (CBDC). A Reuters report pointed out that the bank’s plan to study the matter and conduct a trial is the first step in this direction for Asia’s fourth-largest economy.
With the expansion of the cryptocurrency space providing an alternative to traditional finance, dozens of central banks around the world have launched CBDC projects. China has been developing its digital renminbi, the Federal Reserve is studying a digital dollar prototype, the European Central Bank in the euro zone is considering whether to create a digital euro, and the Bank of Russia will propose a digital ruble prototype this year. A Bank of Korea official said at a press conference:
The share of cash transactions is greatly diminishing. The steps we are taking now are to prepare for changes in the payment settlement system.
The Central Bank of Korea further detailed that the test platform will help simulate commercial banks and retail stores. These trials will also cover mobile payments, fund transfers and deposit processing. The test plan is scheduled to run from August to December this year, but the second phase may extend the test time.
Commercial banks unwilling to cooperate with cryptocurrency exchanges
When the Central Bank of Korea was preparing to explore the option of issuing state-controlled digital currencies, decentralized cryptocurrencies attracted the attention of South Koreans. The local price of BTC, the leading cryptocurrency, reached a record high of about $72,000 this year, but market turmoil has triggered concerns from regulators. BOK recently stated that it intends to closely monitor encrypted transactions through real-name accounts used by Korean traders.
However, major banking institutions have expressed doubts about cooperation with cryptocurrency exchanges. According to a report by the Korea Herald, financial groups such as Hana have decided not to issue real-name bank accounts for crypto transactions. Others who own K Bank, which allows cryptocurrency traders to open accounts on Upbit, have no reason to continue to do so. Yonhap News Agency quoted a senior Woori official as saying that Woori is KB’s second largest shareholder.
The rewards of alliances with cryptocurrency exchanges (mainly transaction fees) are not greater than the risks of possible money laundering problems and hacking attacks.
Upbit, Bithumb, Coinone, and Korbit are just one of the four domestic cryptocurrency exchanges, and are currently cooperating with commercial banks to implement the real-name system. In April of this year, the Korean Financial Services Commission warned that, according to new regulations that will be implemented in September, about 200 coin trading platforms that should currently operate in the country may be closed. The registration of real-name accounts is one of the key requirements that small cryptocurrency exchanges cannot meet.
What do you think of the Bank of Korea’s plan to develop digital currency? Share your thoughts on the project in the comments section below.
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