Next year, a so-called CBDC will be tested in South Korea. 100,000 residents of the Asian country will take part in the effort to test the central bank’s cryptocurrency.
The pilot project will be carried out in collaboration with the Bank of Korea (BOK) and local financial authorities.
Commercial banks issue CBDC
100,000 local citizens can purchase goods and services using CBDCs. These CBDCs are issued by commercial banks in the form of deposit coins. This is similar to using a gift card in store.
To give an overview of the size of the test: South Korea has a population of approximately 51.7 million.
Cooperation between countries
Not long ago, Augustin Carstens, head of the Bank for International Settlements (BIS), urged countries actively working on CBDCs to work together to define a common regulatory framework.
Carstens points to the main reason why CBDCs need a set of rules. Money is a social construct and therefore it is important to ensure that CBDCs are used in a safe and stable manner.
What are CBDCs?
CBDCs are central bank digital currencies. This is a digital currency issued by a central bank. Some forms of CBDCs are created in collaboration with commercial banks. They are tokenized deposits: a form of CBDC in which the value of a CBDC is linked to a deposit with a commercial bank.
For example, Hong Kong is actively launching its own CBDC. Visa revealed the results of tokenized deposits in CBDCs through a partnership with HSBC and Hang Seng Bank.
Visa sees the HKMA pilot as a great opportunity to drive innovation in payments and test new ways to move money.
Our own European Union is also developing a CBDC, called the digital euro.
Source: BtcDirect
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Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
