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SK, Naver, Kakao vying for central bank's digital currency project

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By Park Jae-hyuk

SK, Naver and Kakao have engaged in a trilateral battle to become the partner of the Bank of Korea (BOK) for a project to issue and circulate a central bank digital currency (CBDC) virtually to test whether it can be used successfully.

According to the nation's central bank, Tuesday, SK Inc. C&C, LINE Plus and Ground X were the three bidders that submitted tenders for the project by Monday's deadline.

SK Inc. C&C, the conglomerate's IT service provider, is said to have joined hands with Viva Republica, which operates the Toss mobile money transfer app, and the Korea Financial Telecommunications & Clearings Institute, which provides the Zeropay mobile payment service.

The bidder has engaged in the blockchain business with its own Chain Z platform, which is expected be used for the company to set up a system for the CBDC project. Its two partners are expected to advise it on financial services.

LINE Plus, a subsidiary of Naver, reportedly formed partnerships with Naver Financial, the IT firm's financial unit, and LG CNS, the IT service provider unit of LG Group.

After unveiling the LINE Financial Blockchain platform optimized for the CBDC system last Friday, LINE Plus said it would aim at the global CBDC market. In addition, Naver Financial has an expertise in payment services, while LG CNS has experience establishing a CBDC platform with Shinhan Bank back in March on a trial basis.

Ground X, Kakao's blockchain subsidiary, has collaborated with ConsenSys, an ethereum software company, for the BOK's CBDC project.

"We are happy to cooperate with ConsenSys to strengthen our public network and also build a private network that can cater to a successful CBDC distribution test," Ground X CEO Jason Han said after the two companies formed a strategic partnership in April.

ConsenSys managing director Charles d'Haussy also said at that time: "We are committed to advancing global CBDC efforts and have a strong track record in the space, assisting eight major central banks around the world with CBDC pilots. As such, we have the unparalleled expertise and infrastructural tools required to build the network capabilities for the secure and efficient issuance of CBDCs."

According to industry sources, Samsung SDS decided eventually not to get involved in the BOK's CBDC project, although it had once considered its participation.

When the central bank held a meeting for the project last month, multiple IT firms and commercial banks expressed interest, but the BOK did not allow them to organize consortiums, saying the partners of bidders can only take part in the project as subcontractors. As a result, the number of bidders became much fewer than expected.

The BOK plans to select the preferred bidder within this month, after reviewing their technologies and price quotations. The project will start in August.

The winning bidder will run a pilot program for 10 months budgeted for up to 4.9 billion won ($4.3 million).

A four-month trial will run through December on a cloud platform to verify the technical feasibility of CBDC issuance, distribution and recovery. The second phase of the trial will explore the possibility of expanding CBDC use and widening the implementation of technology to strengthen personal information protection to be completed by June 2022.

Park Jae-hyuk

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