The Bank of Korea to Fully Launch Domestic and International Digital Currency Experiments This Year

Bank of Korea's '2023 Payment and Settlement Report'

The Bank of Korea will actively engage this year in domestic and international experiments related to central bank digital currency (CBDC), including usability tests and the Agora project.

On the 15th, the Bank of Korea announced in its '2023 Payment and Settlement Report' that it plans to pilot a 'CBDC Network' capable of issuing and distributing three types of private digital currencies based on institutional CBDC. For deposit tokens, up to 100,000 citizens will participate in real transaction tests to directly experience the utility of private digital currencies in commerce. CBDC is a digital form of currency issued directly by the central bank. Unlike decentralized virtual assets such as Bitcoin and Ethereum, issuance is controlled by the central bank.

This test will focus on institutional (wholesale) CBDC. In particular, it plans to emphasize testing deposit tokens with a digital voucher function enabled by the programmable features of digital currency, which can be used for purchasing specific goods at designated locations. Lee Jong-ryeol, Deputy Governor of the Bank of Korea, explained, "In the case of general-purpose (retail) CBDC, countries like ours, where small-value payment methods are already well developed, have seen little differentiation from services provided by the private sector."

Additionally, the Bank of Korea will conduct the 'Agora Project,' which explores the potential improvements to the monetary system using tokenized deposits and institutional CBDC. The Agora Project differs from the CBDC usability tests conducted by the Bank of Korea this year. While the usability tests examine cases of private digital currency use in domestic payment and settlement environments through actual commerce, the Agora Project is a collaborative effort with major countries to explore improvements in cross-border payment systems.

Earlier this month, the Bank of Korea decided to jointly promote the Agora Project, a public-private partnership, with the Bank for International Settlements (BIS), central banks of five major reserve currency countries, and the International Institute of Finance (IIF), which represents private financial institutions from seven countries. The BIS and IIF will later announce calls for participation from private financial institutions in the participating countries.

The Bank of Korea plans to go beyond domestic experiments conducted by various countries and examine whether it is possible to resolve issues in cross-border payments and activate them.

The Bank of Korea stated, "Given the participation of major reserve currency countries, this project holds great significance as Korea is involved from the outset in a project that could evolve beyond a simple technical experiment into an actual global financial infrastructure." It added, "As a joint project with major central banks and global commercial banks, it could provide an opportunity for domestic private institutions to discover new business areas."