The Bank of Korea (BOK) announced on Feb. 5 that there is not much incentive to issue central bank digital currency (CBDC) given that the domestic payment and settlement infrastructure is well-equipped.
In its report titled "Situation of major countries’ countermeasures to CBDC," the central bank looked into digital currency-related research and issuance by central banks in each country and determined that CBDC demand is not high in terms of payment settlement in South Korea, as the infrastructure for electronic means of payment and settlement are built in Korea.
The Bank of Korea, however, explained that since there is still a possibility that the necessity of CBDC issuance will be raised in the future, it will continue to review institutional issues and technology study by setting up a dedicated organization such as the Digital Currency Research Team and the Digital Currency Technology Team.
CBDC refers to central bank currency issued in electronic form using distributed ledger technology such as blockchain.
China is preparing to issue CBDCs for small payments, which will replace its main currency, and has completed basic design and standards and is conducting tests in some cities.
The report explained that China's move also aims to reduce its dependence on the private sector in preparation for possible system failures, such as computer errors, at a time when the mobile payment market is heavily dependent on some private operators such as WeChat and Alipay.
The central bank had previously simulated the transfer of funds between banks based on distributed ledger technology between September 2017 and January 2018.
It conducted a mock test of the micro-payment system between September and December of 2018, and is currently conducting a simulation test on simultaneous settlements of securities payments.
