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- CBDC test begins in South Korea Digital Test Project Hangang launches.
- Seven major banks to trial deposit tokens for seamless digital payments.
- The experiment aims to modernize payments with real-time settlements and lower fees.
The Bank of Korea (BoK) is preparing to conduct the most comprehensive CBDC test in the country beginning next month. Known as “Digital Test Project Hangang”. It allows the participants to use the bank deposits to create digital deposit tokens. This will be used by the merchants that have engagements with these banks.
However, according to a recent report, Seven major banks, such as KB Kookmin, Shinhan, and Hana Bank, are set to take part in the pilot running for three months. The goal of the venture is to assess the use of distributed ledger technology to manage the transfers and settlements conducted by the central bank reserves. Currently, the BoK aims to enroll 100,000 individuals by March. A BoK official stated:
“Through deposit token payments, merchants can receive settlement funds in real time. Additionally, related transaction fees are expected to be reduced by minimizing intermediary institutions in the payment process.”
The players will be able to use the current monetary value from their banking account to pay for tokens. This will be in turn traded for deposits. This feature allows the user the ability to convert between the physical cash and the digital cash with ease.
CBDC Transaction Mechanics
Participants can have up to a million won, around $693 of deposit tokens at any given time. Additionally, those tokens can be converted to deposits and back within this interval. The cumulative volume of circulation during a three months period will not exceed 5 million won.
While these deposit tokens will be applicable in online as well as offline selling centers. Representatives from online shopping sites, including Hyundai Home Shopping and Ddangyo, will also be attending and from the on-site stores are 7-Eleven, Hanaro Mart, and Ediya Coffee, among others. The purchases will be made using the means of QR codes in the banking applications. This aids in implementing a quicker and more efficient transaction process for consumers and businesses.
Revolutionizing Payment Systems
However, this is a new experiment in recognizing CBDCs in South Korea, especially considering the country’s progress in advanced technology and innovation. It also means that applicants and brokers would eventually gain wider acceptance of digital currencies. However, potentially better and faster alternatives to cash transferring. The stance places South Korea well at the forefront of CBDC development and implementation. While, it also offers practical knowledge on how the technology can be applied to regular monetary systems with all the odds.
South Korea can be seen to establish an example for other nations to follow. The conclusions may define the development of the subsequent worldwide projects of digital currencies and affect the modification of financial systems.
