Tech Firms Battle for Bank of Korea CBDC Contract
The Bank of Korea (BoK) is intentional about releasing a CBDC as it announced bid results for partnership on issuing a blockchain-based central bank digital currency on July 12. According to reports, the partnership will involve testing for the viability of digital won in the country. Earlier in May, the Bank of Korea stated it was open to receiving applications from any tech firm that was ready to collaborate with it on the digital won.
BoK published a book back in February which focused on addressing the legal issues associated with issuing a central bank digital currency. In the book, the central bank highlighted the need for amendments to existing regulations to ensure that a favorable atmosphere is provided for CBDC. More details in the BoK’s publication revealed that the country would embark on a virtual testing program with respect to the digital currency.
BoK Highlights Benefits of CBDC
BoK acknowledged that a digital currency could increase the Asian country’s GDP by 3%. In addition, the principal stated a digital currency would ensure fast currency distribution and eliminate the high maintenance costs of the fiat currency. Overall, BoK admitted that a CBDC would improve the country’s financial system.
South Korea is looking to position itself since a number of Asian countries, especially China are taking actions on CBDCs. China’s eyes are set on displacing the US dollar as the currency of the world. South Korea, however, is looking to identify the risks that a CBDC could pose for the country. One of the most likely risk experts brought to the fore is the worsening of economic inequalities, which would result from lack of access to relevant digital information.
At the time the Bank of Korea called for bids from tech partners, it noted that cash transactions were on a decline. Thus, it was necessary to act in readiness for the notable advancements taking place on payment systems across the globe. BoK revealed the testing program will be carried out on digital simulations of commercial banks and retail stores, test payments via mobile phones, fund transfers, and deposits.
BoK to Announce Tech Partner Later in July
As participants of the bids were announced by the BoK on Monday, internet conglomerate Naver and Kakao made the list of top bidders. Although the BoK is yet to announce the winner of the contract bids, Kakao’s blockchain subsidiary Ground X, Naver-affiliated Line Plus and conglomerate SK Group were the top three among all the applications. The results announced were preliminary and later this month, the BoK would decide on the partner it is willing to operate the CBDC simulation with. Whoever is selected will be working with an allocated research fund of 4.96 billion won.
While the BoK makes plans for testing a digital won, South Korean regulators have been active in the cryptocurrency sector. In a recent update, financial regulators directed crypto exchanges to liaise with banks in the country on issuing real-name based accounts, unless risk being asked to quit operations.
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