Regulators and policymakers across the globe have been investigating central bank digital currencies (CBDCs). These digital fiat currencies are conceived to be controlled and issued by these financial institutions, primarily a country’s central bank, visit BitIQ official site.
According to reports over fifty central banks and financial administration are evaluating CBDCs. The report that backs this claim is reported by Ruters and provided by the Bank for International Settlements
Around July 2021, The Bank of Korea first made its intentions known about creating its own digital currency. Based on reports from The Korea Herald, the Bank of Korea, together with Ground X, a blockchain associate of Kakao, are in charge of the pilot study.
The Pilot Study is designed into two distinct phases. The first phase kicked off in August 2021 according to a report from The Korea Herald. The primary stakeholders planned to complete the first phase by December of last year but it has now been extended to January of 2022.
The first phase was designed to concentrate on the most basic functionality of digital currency. As for the second phase, the advanced functionality kike privacy concerns of the digital coin will be focused on.
According to the CEO of Onther, Junsik Sim, several firms will be participating in the tests. These include; Kakao Pay, an online payment service, and Kakaobank, a digital lender.
The First Phase of South Korea’s CBDC Testing
On the 24th of January, 2022, the Bank of Korea gave the much-anticipated announcement. The Bank affirmed that it has finalized the first phase of the pilot study on the functionality of CBDC. Presently, the bank of Korea is evaluating the likelihood of integrating the newly developed form of money into the general public. Hopefully, that would be immediately after the second phase of testing is finalized.
According to the Yonhap News Agency, the first phase of testing proves to be very successful. However, the second phase will be the deciding test as to whether or not the digital fiat currency will be implemented. According to the bank of Korea, the first test kicked off in August of 2021 and was finalized in January 2022.
According to the test, the Bank of Korea has affirmed that CBDC showed natural achievement in a cloud-based setting. The second phase is now being prepared for and it is scheduled to be finalized by June 2022.
The bank of Korea asserted in a press release that the possibility of executing numerous functions will be evaluated. These functions include the integration of new technologies and offline settlements. Technologies like one aimed at strengthening the protection of privacy will be tested during the second phase of testing.
Further reports from CoinTelegraph also confirmed that the first phase of testing for the digital fiat currency in South Korea was smooth. The report claims that the first test involved testing the basic use of digital currency as regards insurance and distribution. The second phase, on the other hand, will involve testing the digital currency for real-life use cases. Functionalities such as offline payments, retail payments, and cross-border remittances will be tested.
It was also reported that the bank of Korea is also evaluating the unloading of monetary organizations in the second phase of testing. The second phase is said to share unique similarities with what China is executing with its digital fiat currency at the moment.
Immediately after the testing is finalized by June, the bank of Korea then has to decide its launch. If the second phase is smooth and successful, the bank will then go ahead to launch and also discuss commercialization.
With the first phase of testing completed, South Korea is now among the few countries to have begun and finalized a pilot stage of their CBDC testing. According to information made available by the Atlantic Council, a lot of nations are beginning to wake up CBDC. Presently, about 91 counties are researching their independent digital fiat currency. However, only these countries have completed the pilot phase.