South Korea is set to initiate a pilot program for a central bank digital currency (CBDC) in the fourth quarter of 2024, involving 100,000 citizens. The pilot will be a collaborative effort between the Bank of Korea (BOK), the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS), as outlined in a press release.
During the pilot, approximately 0.2% of South Korea’s population will be able to use tokens issued by commercial banks in the form of a CBDC to purchase goods. The use of these tokens will be limited to buying goods, with other applications like remittances not included.
Potential locations for the pilot project, mentioned in reports from July, include Jeju, Busan, or Incheon.
The BOK views the CBDC as a solution to issues present in existing government-issued grant systems, such as childcare vouchers or payments during the COVID-19 pandemic. These problems include high transaction fees, slow settlement times, and concerns about fraud.
Central banks in many developed economies have been exploring CBDC development as a response to the decreasing use of cash and the growing preference for digital payment methods among consumers. China has advanced the furthest in the development of its digital yuan, with South Korea being among the first runners-up. South Korea conducted tests related to CBDC issuance and distribution in a simulated environment in December 2021.