Bank of Korea completes first phase of digital currency pilot

The Bank of Korea has successfully completed the first phase of its central bank digital currency mock testing started in August 2021. 

The South Korean central bank said that the first phase of its CBDC mock testing was completed in December while the second phase is currently underway, reported YNA news. The first phase of the mock test involved some of the basic functions of the sovereign digital currency such as distribution and issuance.

The second phase of the central bank digital currency (CBDC) pilot would test real-world functionalities such as cross-border remittance, retail payments and offline payments. The bank stated:

"We will confirm the possibility of operating various functions, such as offline settlements, and the application of new technologies, such as one intended to strengthen privacy protection during the second phase of the test."

Bank of Korea (BOK) is also looking to onboard financial institutions for the second phase, quite similar to what China is currently doing with its digital yuan. However, unlike China, BOK-issued digital currency would also focus on user privacy.

The second phase is expected to complete by June 2022, after which the central bank plans to chalk out an official launch and commercialization plans. 

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South Korea has thus joined the select group of nations that have either started or completed the pilot phase of their CBDC testing. As per data from the Atlantic Council, currently, 91 nations are working on their sovereign digital currency and only 14 nations have reached the pilot phase. 

South Korea has become one of the leading crypto-compliant nations over the past few years and recently revealed its plans to become a world leader in the metaverse as well.  While China is currently at the forefront of the CBDC game, many European and Asian counterparts have accelerated their development plans to catch up with its pace.