Bank of Korea aims to launch CBDC testnet by next year
The Bank of Korea (BOK) today announced that it finished its design and foundational work to establish a CBDC testnet. The project will soon undergo 3rd party audits and reviews so that it may be launched as early as next year.
The BOK CBDC program, when finally launched, will aim to facilitate issuance and redemption of digital currencies for Korean Won value. The digital KRW will be pegged 1:1 with KRW. The digital KRW will also stand separate from reserve deposits and settlement deposits within the bank. All transactions using the digital currency will be managed by a distributed ledger (DLT).
A CBDC program through most central national banks puts said banks in charge of the issuance and redemption of the digital currency. The BOK CBDC will operate in a such a way that puts private institutions in charge of issuance and redemption because regulatory limitations prevent BOK from directly distributing CBDCs to individuals or companies without going through private financial institutions. This limitation may present yet another explanation as to why initial reports suggested BOK would not issue a CBDC at any time.
Auditors will put the CBDC testnet through a series of stress tests in order to determine its functionality under expected volume loads in a restricted environment.
BOK completed the preliminary design and development of the pilot project last July with the aid of a research team and a PhD-level researcher responsible for digital innovation research in payment settlements. The workforce as a whole studied the underlying technologies related to digital payment and payment settlement programs that utilize digital currencies and cryptocurrencies.
In addition to the immediate need for a CBDC, BOK decided to review the technical and legal requirements for issuing and operating a CBDC system in order to preempt negative blowback from operators of existing payment environments in South Korea.
