Banks Busy Preparing for CBDC Real Transaction Testing

NongHyup and Industrial Bank Initiate System Construction
Expected to Be Usable at Hanaro Mart and Convenience Stores from December

Banks are developing systems for a Central Bank Digital Currency (CBDC) real transaction test scheduled for December, targeting up to 100,000 citizens. This test involves the Bank of Korea issuing digital currency, which citizens use to make payments to merchants.

According to the financial sector on the 19th, NH Nonghyup Bank announced a bid for a service contract to build a system responding to the Bank of Korea's CBDC usability test. The project budget is within 2.4 billion KRW, and after the contract is signed on December 18, the service for system construction will proceed until June 2025. Nonghyup Bank is also selecting merchants where CBDC can be used, and Hanaro Mart, affiliated with Nonghyup, is expected to participate in the test.

Nonghyup Bank is considering expanding into the blockchain business based on the CBDC test. Last month, it conducted a service to concretize blockchain business and establish an innovation model. First, it plans to develop new business models by concretizing global blockchain projects and also to develop an innovative model for cross-border payments based on blockchain. It will monitor related trends, prepare reports, and organize detailed requirements necessary for project participation to negotiate with project-leading institutions. Support related to the CBDC test will also be carried out within the blockchain business domain. Even after the real transaction test is completed, Nonghyup Bank will derive plans on how to utilize the system it has built. Nonghyup Bank expects to internalize leading blockchain commercialization capabilities through central bank-led blockchain projects and global digital finance projects.

Banks are developing systems for a real transaction test of central bank digital currency (CBDC) scheduled for December, targeting up to 100,000 citizens.

IBK Industrial Bank also started building infrastructure for the CBDC usability test in July. Currently, IBK has completed infrastructure construction and development and is conducting infrastructure-related tests. Specifically, infrastructure construction involves developing a user electronic wallet application (app) for the real transaction test. The basic functions are provided by the Bank of Korea, but the goal is to embed the electronic wallet within IBK’s app, i-ONE BANK. The electronic wallet will support payment methods such as QR code scanning, near-field communication (NFC) payments, and online payments to ensure convenience similar to regular card payments. During the real transaction test, development of a merchant app capable of receiving CBDC payments and connecting the participant institution’s CBDC system linked to the Bank of Korea with IBK’s internal system will also be carried out.

CBDC is a digital currency electronically issued directly by central banks like the Bank of Korea using blockchain technology. It is a legal tender fixed at face value like the banknotes we commonly use, distinguishing it from virtual assets like Bitcoin. When the Bank of Korea issues institutional CBDC to banks, the banks issue another digital currency called deposit tokens based on it, which can be used at various merchants. This is the core of the current test. Currently, commercial banks including Nonghyup Bank and IBK Industrial Bank are selecting places where deposit tokens can be used. Once participating institutions are finalized, a network connecting banks, merchants, and the Bank of Korea will be established, and the CBDC system will be built.

The Bank of Korea is also engaging in international cooperation related to CBDC beyond domestic real transaction tests. Together with the Bank for International Settlements (BIS), six central banks (United States, United Kingdom, Japan, France, Switzerland, Mexico), and the Institute of International Finance (IIF), it is promoting the Agora project to explore the potential for improving monetary systems using tokenized deposits and institutional central bank money. Maintaining a dual structure between central banks and commercial banks, the project verifies the effectiveness of CBDC, with participation from KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, and IBK Industrial Bank.