The Bank of Korea (BOK) has announced that it will launch a pilot program to issue a Central Bank-backed Digital Currency (CBDC) by 2021.
According to sources familiar with the matter as reported today by local news agency, Yonhap, the planned test program will put Korea’s central bank in a position to issue and retrieve the digital currencies while other financial institutions will oversee its circulation all over the country.
“Test running the [CBDC] pilot program will be similar to the process of issuing and circulating banknotes,” a BOK official said.
BOK prepares for changes
South Korea had made significant efforts in March this year toward issuing its national cryptocurrency.
At the time, the BOK flagged-off a 22-month program focused on the technological and legal provisions needed to launch a CBDC.
The BOK stated that its CBDC program is not being conducted to prepare for the “actual issuance of its national cryptocurrency, as the demand for banknotes is still on the increase.
However, the bank said the development would prepare them for future changes in the global financial market.
Even though the BOK reiterated that its digital currency program is not being conducted to usher in a national cryptocurrency issuance, recent events in the country, however, suggest otherwise.
During the coronavirus (COVID-19) pandemic peak, the World Health Organization (WHO) warned nations about the virus’s possible spread through contaminated banknotes.
The warning prompted the BOK to quarantine banknotes for two weeks and burn some of these currencies believed to be contaminated by the virus to mitigate the pandemic’s spread.
With the possibility of spreading the virus through banknotes, which could result in huge losses, the bank of Korea may want to hasten its CBDC pilot program to determine whether to fully adopt it in the coming years or not.
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