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South Korea’s CBDC Pilot to Enter into Distribution Phase Next Year

South Korea’s central bank is looking to start the testing of the distribution of its central bank digital currency (CBDC) next year, as stated in a local news outlet. According to the announcement, the pilot scheme for the CBDC will soon begin with its distribution phase, with the digital won entering circulation.

The Bank of Korea first announced that it will be launching a 22-month CBDC pilot program, that will be running until December 2021. The first phase, which ended in July, involved the designing and checking of the technology behind the digital currency.

The second phase focused on analyzing related processes and seeking external consultation, which has started recently. Phase 3 will be the last and final phase of the pilot, with the distribution and circulation of the country’s CBDC. Blockchain technology will be used for keeping track of the transactions.

The Bank of Korea has not yet announced a launch date for the CBDC, but is continuously testing it out. South Korea has kept a lukewarm stance on central bank digital currencies, and the central bank would take at least more than one year for an official rollout.

Chinese CBDC processed 1.1 billion yuan

In the race to be the first country to launch a functional central bank digital currency, China has been ahead of its counterparts, as it has already begun experimenting with its digital currency.

The pilot version of the digital currency released by the PBOC is rumored to have been used in 3.13 million transactions. The transactions’ total worth translates to more than 1.1 billion yuan ($162 million).

The Digital Currency Electronic Payment (DCEP) is meant to transform China’s economy and propel it at the forefront of other countries in terms of economic global competitiveness. Boasting of being the world’s second-largest economy, China aims to be the first to achieve a full-fledged official CBDC, as the trend of cashless and contactless payments has accelerated with the COVID-19 pandemic.

However, it had been said that the Chinese CBDC would not be running on blockchain, but merely serve the purpose of replacing physical cash, which again has accelerated the necessity of the DCEP.

EY-Led Consortium Submits Bid To Help Develop South Korea's CBDC

A consortium led by Ernst and Young subsidiary in Hanyoung has made the first and only bid to construct the business model for the Bank of Korea’s Central Bank Digital Currency project.

Accordig to reports from local news outlet ZDNet Korea, the consortium which also comprises of Samsung SDS and Naver line may be chosen for the BOK’s CBDC pilot system design if no other company submits a bid before the deadline revised to October 29.

With the project estimated to have a budget of 800 million Korean Won, the job to be done as described will be to design the complete business model for the proposed Digital Won and industry experts as noted by ZDNet Korea noted that only a few companies have the required expertise to carry this out.

EY, renowned as one of the Big Four auditing firms with strong accounting and consultancy background will be in charge of designing processes for each task necessary for the operation of the CBDC as a whole, while Samsung SDS and Naver Line will collaborate in the form of system architecture. Should there be no more bid submissions, a technology evaluation will be carried out on the EY led consortium and a passing score would be needed to get approved for the project.

EY’s Blockchain Solutions To Be Tested on a National Scale

EY has registered and launched several blockchain-based solutions with the latest being an enhancement of its blockchain analytics tool, the Explorer & Visualizer solution to investigate on-chain data. The blockchain competence of EY would however be tested on a grander level should its aligned consortium win the Bank of Korea’s bid.

Ernst & Young has been exploring the boundless capabilities of blockchain technology for a while now and it made a foray into the public space with its solution for public funds management launched in October 2019 .

South Korea's Digital Won Project Sees First Trial Stage Completed

In a press release issued on Monday, the Bank of Korea (BOK) said that it has completed the first stage of its Central Bank Digital Currency (CBDC) or Digital Won trials.

Many central banks worldwide are reconsidering the use of fiat currencies in their economies as the financial revolution is taking centre stage across the board. South Korea ranks as one of the most developed Asian economies exploring the launch of a CBDC, with the country setting up a panel to accelerate its CBDC pursuit as far back as June 2020.

As reported by the Yonhap News Agency, the first trial was launched back in August 2021 and completed in December, with the result revealing that the CBDC showed normal operations in a cloud-based environment.

While the milestone recorded in the just concluded first trial stage is significant to the development of the Digital Won, the apex bank said there are more functionalities to test out in the second stage.

“We will confirm the possibility of operating various functions, such as offline settlements, and the application of new technologies, such as one intended to strengthen privacy protection during the second phase of the test,” the BOK said in a press release.

The second phase of the trial is billed to commence right away and is expected to span until June 22 this year.

While no Asian central bank has officially launched a CBDC to date, the People’s Bank of China (PBoC) can be credited for developing the world’s most sophisticated CBDC to date. The country’s e-CNY project has been in advanced testing for a very long time. The PBoC has notably developed a digital wallet for the new legal tender accessible on Chinese-focused Google Play Store and Apple’s App Store, respectively.

The timeline for the launch of the e-CNY is not yet known, but the CBDC is drafted to be used at this year’s Beijing Olympics games by foreign athletes.