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The Bank of Korea will conduct simulation experiments for its CBDC in the second half of 2021, according to information on its official site. This marks yet another country ramping up its efforts to test and launch a CBDC.
South Korea has been considering a CBDC for some time, with numerous officials hinting at progress. Bank of Korea Governor Lee Ju-yeol, in February 2021, said that it was better to get it right than fast. Meanwhile, the Shinhan Bank has built a platform that could potentially be used for a CBDC.
Ju-yoel preferred to take an approach of caution, similar to the U.S. He also said that China’s digital yuan would not affect South Korea. Some analysts have said that China’s CBDC could dominate the global economy, but most countries have dismissed these claims.
The Bank of Korea also clarified earlier this year that CBDCs are fiat currencies and not virtual currencies. In other words, CBDCs are merely digital versions of fiat currencies that are based on Distributed Ledger Technology.
That has been one of the primary criticisms of CBDCs, i.e., they come with the same shortcomings of fiat currencies, but that has not stopped R&D. Several countries are now well underway with their CBDC projects, and 2021 will be a landmark year.
These countries include China, Russia, and Japan, all of whom are pouring tremendous resources into digitization. China is by far the leader here, having already conducted several pilot programs, which were well-received. It’s expected to make the official launch by the end of the year.
Most countries are still in the conceptualization stage, with some others running pilots. Only two countries, the Bahamas and Cambodia, have officially launched. This is why PwC ranked them as the best CBDCs in a recent report.
The benefits of having a blockchain-based currency is clear, but detractors point out that it is still centralized. Hence, it is subject to all the trappings of a centralized system. Still, it is an important step towards mainstream adoption.
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