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Starting in December, selected participants will be able to use digital tokens, converted from bank deposits, to make payments at domestic supermarkets and convenience stores, according to sources, Thursday.

This initiative is part of a comprehensive usability test for a central bank digital currency (CBDC), conducted by the Bank of Korea (BOK) in collaboration with six major commercial banks.

A CBDC is a new form of digital money issued by a central bank. Unlike cryptocurrencies like Bitcoin, which can fluctuate in value, a CBDC is legal tender with a fixed face value, similar to traditional banknotes.

Under a pilot project, 100,000 selected individuals will be able to purchase goods with deposit tokens, akin to using vouchers, starting in December at the earliest. The decision was finalized during a recent meeting of the Korea Federation of Banks.

Currently, banks use deposits in their accounts at the central bank for transactions and settlements. This test will explore whether this process can be enhanced or replaced by using CBDCs. In simple terms, the BOK will issue a wholesale CBDC to banks, which will then convert it into deposit tokens for use by consumers at designated retail locations.

As the pilot program progresses, participating banks are making preparations by forming partnerships with retail outlets and developing dedicated digital platforms.

NH NongHyup Bank, for example, plans to include its subsidiary Hanaro Mart, while other banks are in discussions with major convenience stores and supermarkets to join the initiative.

Once the participating institutions have been finalized, a network will be established connecting the banks, affiliated stores and the BOK, paving the way for smooth transactions.

This initiative builds on plans announced last October. At that time, the BOK and financial authorities outlined their commitment to developing CBDCs, citing the rapid shift toward a digital economy and the corresponding decline in the use of traditional banknotes.

"While the timeline seems slightly delayed compared to our initial expectations, we are working to launch the CBDC test involving 100,000 participants using deposit tokens by the end of the year, which would be a globally significant milestone," a banking industry official said.

In addition to the domestic pilot program, the BOK is actively participating in Project Agora, a global initiative led by the Bank for International Settlements and the Institute of International Finance. This project, involving five major currencies, aims to explore the tokenization of cross-border payments and establish connections between central banks and the banking sector on a global scale.

Forty private institutions were recently selected to participate in the project, including six major Korean banks: KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, NH NongHyup Bank and the Industrial Bank of Korea.