South Korea to Pilot CBDC in Notable Cities, Excluding Seoul
The Bank of Korea is advancing with its Central Bank Digital Currency (CBDC) pilot, selecting three potential regions for issuing and testing the digital currency.
Narrowed Down to Three
On July 31, it was confirmed that the Bank of Korea has chosen Jeju, Busan, and Incheon as its candidates for the “private target CBDC test bed”. Notably absent from the list is the nation’s capital, Seoul, according to a report from a local South Korean media outlet.
Pioneering with CBDC
As the report suggests, the Bank plans to pick one region from the aforementioned for experimenting with CBDC payments and distribution at a public level. It also aims at securing franchises that accept payments via CBDC. A bank official reportedly stated, “The CBDC electronic wallet app will allow not only local residents but also many civilians, such as tourists to [partake].“
Similar to the Local Currency Scheme
The Bank of Korea indicated that the regional closed tests of the CBDC will resemble the issuance and distribution of the local currency scheme currently used in various regions of South Korea. The local currency scheme, introduced during the COVID-19 pandemic, served as a basic income and relief payment solution.
Regions and Their Local Currencies
Jeju, Busan, and Incheon – the potential pilot regions – already issue and distribute their local currencies like ‘Tamranjeon’, ‘Dongbaekjeon’, and ‘Incheon e-Eum’ respectively. According to an official from a commercial bank in Korea, the choice of location may be “greatly inclined” towards Jeju due to its large population.
Challenges and Alternatives
As per the local report, CBDCs have more “technical barriers” to overcome compared to local currencies. Meanwhile, multiple banks in South Korea are conducting research on stablecoins as a possible efficient alternative to CBDCs.