Digital Won Enters Real-World Testing: South Korea Begins CBDC Trial with 100,000 Consumers

TLDR

• South Korea to launch CBDC test with 100,000 consumers as early as March 2025
• Seven banks including major commercial banks will issue deposit tokens worth up to 1 million won
• Consumers will use electronic wallets to make purchases at convenience stores, bookstores, and delivery apps
• The three-month test aims to check issuance of tokens, consumer purchases, and merchant payments
• Global institutions like BIS are watching the test results with interest as CBDC experiments expand worldwide

South Korea is set to begin a major test of Central Bank Digital Currency (CBDC) involving 100,000 financial consumers. The test could start as early as this month, according to a Bank of Korea official.

The test will allow consumers to use deposit tokens issued by commercial banks based on CBDC. These tokens can be used to purchase goods at various merchants, including convenience stores and cafes.

Seven banks are taking part in this test. They include the five major commercial banks in Korea: KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup. Industrial Bank of Korea and Busan Bank will also join the program.

The Bank of Korea has been studying CBDC since 2021. This real-world test was first planned for late last year but was delayed to coordinate with all the institutions involved.

The test will check if three main stages work smoothly. First, banks will issue deposit tokens with digital voucher features. Then consumers will use these tokens to buy items at stores. Finally, payments will be sent to the merchants.

Consumers who join the test can apply for deposit tokens from their bank. Each person can get tokens worth up to 1 million won (about $750 USD). They will use electronic wallets to show QR codes at payment locations.

Merchants Accepting Digital Tokens

Several merchants have already agreed to accept these digital tokens. They include the 7-Eleven convenience store chain, Kyobo Book Centre, and the food delivery app “Ddaenggyeoyo.” The “Seoul Youth Culture Pass” program will also accept the tokens.

The Bank of Korea has prepared for this test by expanding its team. It has created a new Digital Currency Research Office and added more staff to handle CBDC projects.

The test will run for about three months. If it goes well, talks about officially introducing a CBDC in Korea may move forward faster. However, the Bank of Korea will need to review the results carefully to check how useful and secure the system is.

Other Countries

Other countries are watching Korea’s test with interest. The European Union, which is working on its own CBDC plans, is paying close attention to the results.

In November 2023, when Korea announced this test, Cecilia Skingsley from the Bank for International Settlements (BIS) said the world would be watching. She noted that learning from CBDC projects in developed digital economies like Korea would be valuable.

The BIS is an organization that helps central banks work together. Its interest shows how important Korea’s test could be for global digital currency development.

A Bank of Korea official explained some benefits of CBDC.

“If CBDC is introduced, payment services will improve, resulting in lower transaction fees and better financial inclusion,” the official said.

The same official also noted possible challenges. “As a new technology, there might be limits in terms of practicality and security,” they said. The Bank plans to make improvements based on what they learn from this test.

This test represents one of the largest real-world CBDC trials to date. With 100,000 users and multiple banks and merchants involved, it will provide valuable data on how digital currencies might work in everyday life.