South Korea’s central bank plans to test its ability to distribute a digital won next year.
English-language news outlet The Korea Herald reported on Oct. 7 that the Bank of Korea has announced the launch of a 12-month pilot program that would run through December 2021.
Bank of Korea’s distribution and circulation test is the final part of a three-phase digital currency pilot program. During this stage, the central bank will distribute its central bank digital currency (CBDC) and oversee its circulation.
The first step—which concluded in July—consisted of designing and checking the CBDC system, while the second phase—which recently started—analyzes the processes and seeks outside consulting.
Bank of Korea also made clear that the pilot program in question is not a confirmation that it intends to actually launch a digital currency. All of those tests are only meant to test the CBDC to provide the institution with information that will be useful when deciding whether the system should be deployed or not.
Are CBDCs the new space race?
Some countries stand to profit greatly from the launch of a digital version of their fiat currency, as it would potentially expand the reach of its economy far outside its borders. China’s central bank—whose CBDC is ready for deployment—stated in mid-September that the issuance and control of a digital currency is a “new battlefield” of competition between sovereign nations as it would bring great changes to existing international finance.
Some are alarmed by such developments as they believe the creation of a digital currency could render other countries less competitive. For instance, German think tank dGen editor Maggie Clarendon believes the euro will be overtaken by the Chinese central bank digital currency unless the EU launches its own CBDC by 2025.
Also in September, The Bahamas and France announced significant developments in state-led digital currency projects. The Bahamas plans to roll out its digital currency, the sand dollar, this month while France decided to run the tests of its CBDC on the Tezos network.