Korea embarks on steps to commercialize digital currency

Vice chairman of the FSC Kim So-young [Photo by Yonhap]

South Korea’s financial authorities are embarking on a full-scale experiment on how to apply Central Bank Digital Currencies (CBDCs) to actual financial transactions, such as deposits and payments.

Kim So-young, vice chairman of the Financial Services Commission (FSC), said on Wednesday that the financial authorities plan to issue deposit tokens based on deposits to bank customers who wish to participate in the trial and actually utilize them from the end of next year.

The remarks indicate its intentions to involve ordinary financial consumers in the experiment by the end of next year.

Kim also said that the Bank for International Settlements (BIS) is showing much interest in the CBDC usability test.

The test will run from this month until the end of next year, focusing on institutional digital currencies, or wholesale CBDC, which will be used in interbank fund transfer transactions and final settlements.

Currently, banks use deposits in accounts opened with the central bank for fund transactions and payments.

Financial authorities, including FSC, the Financial Supervisory Service (FSS), and the Bank of Korea (BOK), will test whether this process can be replaced with CBDC based on distributed ledger technology.

When the BOK issues wholesale CBDC, financial institutions participating in the test will issue and use deposit tokens as a payment and settlement method linked to it.

Regulatory authorities such as the FSC and FSS also plan to analyze the effects of CBDC on the economy and finance and review consumer protection issues.