South Korea’s Central Bank Shortlists Regions for CBDC Pilot, Excludes Seoul

Three locations have been nominated by the Central Bank of Korea (BOK) as potential locations for its central bank digital currency (CBDC) trial. Surprisingly, Seoul, the capital of the country, is not one of them. According to IT Chosun, Jeju, Busan, and Incheon are the main areas at stake.

The BOK will pick one of the three finalists as its ultimate decision, and after doing so, it will work with franchisees that can handle CBDC payments. A private test of CBDC payments and distribution is planned for the following year, with the pilot program’s goal being to test them out at the public level. The bank will consider a variety of elements when deciding on the pilot location, including the anticipated number of users and the effect on the local economy.

A representative from a commercial bank said that the Bank of Korea had difficulties due to the vast number of eligible individuals in Busan. As a consequence, Jeju, which has the next-largest population, was selected. The CBDC electronic wallet software was created with inclusivity in mind, enabling both locals and visitors to take part in the initiative.

To make the use of the CBDC easier, the BOK is already in discussions with distribution firms, including significant marts. The regional CBDC tests have geographical constraints and are based on the issue and circulation of local currencies in South Korea.

Currently, Tamnaneunjeon is run by Jeju Bank in Jeju, Dongbaekjeon by Busan Bank in Busan, and Incheon e-Eum by a partnership between Kona I and Nonghyup Bank in Incheon.

Contrary to these regional currencies, CBDC still has a number of substantial technological obstacles to overcome. The large-scale retail payment system project of the BOK, however, is anticipated to draw a huge number of IT specialists and associated staff, including those from illustrious organizations, so the IT sector is still enthusiastic.

Based on the outcomes of the pilot test, the BOK intends to progressively broaden the range of eligible regions. In addition, KEB Hana Bank is investigating stablecoin alternatives such tokenized deposits while working on CBDC pilots with the BOK. Since 2020, the central bank has been actively working on this project, which is now in its second phase after finishing its first.