South Korea joins the list of countries seriously considering the introduction of a state-supported digital currency. The central bank in Seoul has launched a pilot program to test the technical and legal framework until the end of 2021.
In the crypto year 2020, the issue of state-organized e-currencies will increasingly become a trend that is no longer limited to a niche. Latest case: South Korea. The central bank of South Korea (Bank of Korea) has announced the start of a large-scale test programme there. The currency authorities in Seoul speak of a central bank digital currency (CBDC), meaning an image of the domestic won based on blockchain technology. Initially until December 2021, the introduction of a South Korean CBDC is to be reviewed, with a particular focus on gaining experience with technological and legal issues of an e-won.
Background on South Korea and E-Won
The timetable presented by the central bank for testing a national digital currency includes four phases. Firstly, the e-won is to be precisely defined by July 2020 and a test network developed. The technological testing process is to be completed by August 2020. After that, the intention is to discuss use cases with partners from the business world. 2021 is then reserved for the actual use of the CBDC in South Korea. In the East Asian country with a population of over 50 million people, politics recently cleared the way for the legal use and trade of Bitcoin and Co, which the cryptoscene there celebrated as a „milestone“.
Meanwhile, South Korea is by no means alone in the international arena with its program for a digital currency supported by the central bank. In Europe, Sweden has already launched a similar project, while Switzerland and France are working intensively on similar plans. In Germany, the Bundesbank is extremely sceptical about such CBDCs, while Finance Minister Olaf Scholz is open to the idea. Observers are particularly alert to China, where preparations for an official e-currency appear to be well advanced.
Will the coronavirus crisis accelerate the introduction of CBDCs?
An interesting indication of why the discussion and testing of government digital currency is currently experiencing great momentum is provided by a recent paper from the Bank for International Settlements (BIS). In it, experts point out that there are fears among the population that the coronavirus could be passed on when using cash. Although this has not been scientifically proven, the fears should be addressed. In addition to sterilizing banknotes, the BIS, which is also called the „Central Bank of Central Banks“, recommends that central banks around the world examine the introduction of CBDCs more intensively than they have done to date. After all, the advantages are obvious: digital currencies make payments and transfers possible in real time, documented in a tamper-proof manner and without physical contact. The crypto industry is likely to benefit from the development as a whole, both as a service provider and through increased acceptance of crypto currencies in everyday life.