By Michael Scott
Three cities, including Busan, Jeju, and Incheon, are considered targets to test the CBDC payments. On July 31, the financial sector confirmed the Busan, Jeju, and Incheon selection by the Bank of Korea as the prospects for the ‘private target CBDC test bed.
Korea Readies Regions to Assess CBDC Payment and Distribution
The Bank of Korea acknowledged the involvement of commercial banks in coordinating the pilot test of CBDC. Han Eun’s final intention is to pick one of these cities, obtain a franchise capable of accepting CBDC within the region, and conduct trials with the CBDC payment and distribution process.
It has been established that this kind of regional-closed CBDC test will be the same as the present local currency’s issuance and distribution structure. The local currency is a form of optional currency that local governments provide to revive the economy. One can buy or charge even when one is not an area resident. However, a physical limitation exists that one can only utilize it within a particular region.
South Korea’s CBDC Electronic Wallet Accessible to Local Tourists
According to a commercial bank official, the CBDC electronic wallet will allow local tourists and several unspecified persons, for instance, tourists, to open. He also claimed they were reaching out to distribution firms, for instance, big marts. Busan, Jeju, and Icheon are currently providing and distrusting local currencies, including Dongbaekjeon, Tamranjeon, and Incheon e-Eum, respectively.
Jeju Bank operates Jeju City’s Tamranjeon, Incheon e-Eum is run by an association of Nonghyup Bank and Kona I, and Busan Bank operates Busan City’s Dongbaekjeon.
Bank of Korea Monitoring CBDC Processing Speed
Nevertheless, different from other local currencies, the CBDC model experiences technical hindrances that should be addressed. Last year, the Bank of Korea conducted remote testing of the CBDC mock system’s payment performance with places apart from the metropolitan region for half a year. However, it was established that processing speed was inferior to the big operators of domestic micropayment.
An IT industry official claimed that many IT experts are needed amid the Bank of Korea’s plan to have a large-scale retail payment system initiative. He further explained that a substantial number of associated personnel, including major firms, are progressing.
Amid the private scheduling for next year and the short preparation time frame, the Bank of Korea is anticipated to pick a pilot location following comprehensive consideration of the performance based on the anticipated number of users and the ripple impact on the local economy.
Concerns that CBDC Uptake Potential to Overwhelm Bank of Korea Resources
A commercial bank’s official divulged that concerning Busan’s case, the number of qualified citizens is quite large to the extent that the Bank of Korea experiences an enormous burden. Such consideration convinced the Bank of Korea to favor Jeju, which possesses the next biggest population.
In the meantime, some industry players anticipate that the Bank of Korea will slowly enhance the scope of applicable regions based on the findings of the closed-area payment experiment. China provided CBDC earlier and began with five cities during the Beijing Olympics 2020. Following the initiation of the pilot project, it slowly grew its operation region and is presently running in 26 cities. A Bank of Korea official claimed that preparations for the customer test are ongoing without portraying unnecessary difficulties and disruptions.