South Korea has become the latest country to work towards establishing a central digital currency. The push to create a digital won comes as the value of cryptocurrencies such as bitcoin have plummeted due to the impending introduction of a smattering of new regulations.
National banks around the world are developing central bank digital currencies (CBDC). Now, South Korea’s national bank has become one of them.
The Bank of Korea (BOK) said on Monday that it was looking for a technology supplier to build a pilot platform for a digital won. The recruitment process will take place through an open bidding process and aims to explore the practicalities of launching a CBDC in a test environment, according to Reuters.
A trial run is being planned to explore how the electronic currency can be used for the settlement and remittance of everyday goods and services. The test run is slated to begin in August and continue through June 2022.
The pilot would be the first exploratory step for a digital won in Asia’s fourth-largest economy. However, the bank indicated that the pilot doesn’t mean that it has any immediate plans to launch a digital coin, according to Reuters.
In March, Seoul-based Shinhan Bank said it had built a blockchain-based pilot platform for a potential South Korean CBDC. This would involve established banks such as Shinhan as intermediaries to distribute the digital Won to consumers.
Recently, central banks of several major economies have announced intentions to introduce state-backed cryptocurrencies. China is leading the way, with a digital yuan currently being rolled out to consumers in a trial phase.
Other countries have also indicated their exploration of CBDC. Last week, the US Federal Reserve said it would move forward in its efforts to develop a digital dollar.
France, Sweden and Germany are among the European countries that have also touted the idea of introducing digital versions of their national currency. The European central bank (ECB) has indicated that it is currently “in a preparation phase” of developing the concept of a digital euro.
In a statement, Christine Lagarde, president of the ECB, said that “the euro belongs to Europeans and we are its guardian. We should be prepared to issue a digital euro, should the need arise.”
According to GlobalData’s analysis, the emergence of digital currency is a natural evolution of the shift to digital commerce adoption. Last year, Seven central banks (the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Sveriges Riksbank, and Swiss National Bank) and the 63-central bank member Bank for International Settlements (BIS) have released a joint report assessing CBDC could help deliver banking public policy objectives.