|Seen above is the headquarters of the Bank of Korea in Seoul. Yonhap|
BOK unveils 22-month pilot test plans
By Lee Min-hyung
|Bank of Korea Governor Lee Ju-yeol|
The central bank had taken a wait and see stance over digital currency experiments, as it judged the CBDC would not arrive in the foreseeable future. This view came as the digital form of fiat money is still in its infancy, raising concerns at the BOK that the issuance of a digital currency could weaken its authority and destabilize the financial system here.
But under the renewed CBDC initiative, the BOK said it would carry out a 22-month pilot test to verify whether a digital currency was stable enough to replace paper money. The drive, which started in March, will last until the end of 2021, during which period the central bank will focus on checking technical issues in running the pilot system.
The announcement reflected recent changes in stance in major developed countries ― including the U.S., Japan, the United Kingdom and Canada, the BOK said.
"The U.S. and Japan had had no plans to issue a CBDC in the near future, but they changed their stance recently to enhance research in the emerging area," an official from the BOK said.
Other major Western countries have also started to recognize the importance of taking preemptive steps toward CBDC research. In January, the six central banks from Canada, the United Kingdom, Japan, the European Union, Sweden and Switzerland established a joint research group on a CBDC.
In Asia, China is the most active player in bracing for the possible looming currency paradigm shift. The People's Bank of China recently said the development of a CBDC was its "top priority."
"The BOK also decided to remain proactive in the rapid shift in payment environments here and abroad, so we are going to set up the CBDC pilot system and check technical and legal issues surrounding its introduction here," the official said.
But the central bank said the CBDC introduction would not be in the near future, as demand for cash remains constant and payment service markets are competitive enough for customers to rely on for now.
The latest initiative will be driven by the BOK's digital currency research team which was established under its financial payment division in February. The central bank also plans to run an advisory group by teaming up with internal and external experts to review technical and legal details.
The BOK will also tighten monitoring of any shifts in the external environment surrounding the CBDC research. It also noted it would enhance exchanges of research results with major overseas central banks.
BOK Governor Lee Ju-yeol said in a New Year address that the central bank would take an active part in international seminars and conferences on a CBDC this year.