By Alicia Maher
South Korea’s central bank said it has successfully completed a test to facilitate remittances throughout the country. The bank said it links the central bank digital currencies of other counties in the test. The central bank equally ran a test of the local CBDC in NFT purchases.
Before the Full Swing
Note that the central bank first launched a money laundering and terrorism financing monitoring unit. The system enables the submission of individuals’ data during digital transactions. The central bank’s latest test discovered that the CBDC has the capacity to process 2,000 transactions every second.
The Governor of the Bank of Korea, Chang Yong Rhee, spoke about South Korea’s CBDC test in a recent address. He stated during the address that the central bank just completed a ten-month experiment. It centered majorly on the viability and use cases of the digital Won.
The central bank Governor equally made observations concerning cryptocurrency’s distributed ledger technology. He said it does not have sufficient scalability needed for a retail CBDC operation. Due to that, it might be better to execute on the standardized centralized database.
Rhee equally drew from the fact that CDBC transactions can be done even if both recipient and sender are not connected to the internet. This was made possible by the communication system built in CBDCs like the near field communication. Such feats are, however, not possible with cryptocurrencies, at least for now.
The Case for CBDC
Chang Rhee said it has been realized that there is no perfect CBDC or technology that would satisfy every expectation or goal at a time. He stated further that CBDC decisions would require trade-offs like focusing on compliance instead of privacy.
The country embarked on its CBDC test journey in 2021. It finalized the first half of the test back in January.
The central bank created simulation environments for the CBDC in the cloud based on distributed ledger technology. This was done between August and December last year. It then proceeded to test some functions like issuance, redemption, distribution, and manufacturing.
The central bank further tested the likelihood of implementing other functions in the second phase. These include offline transactions, policy support, and digital asset transactions. The second phase test lasted till June.
CBDCs have become the ready alternative for governments and central banks across the globe. Most of them prefer to create a digital version of their fiat currencies than have cryptocurrencies.
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