Nov 10, 2022
[Delio] The Discovery of the Korean Crypto DNA — South Korea CBDC
The new craze, which has recently seen Bitcoin and other cryptocurrencies dominate news stories around the globe, is nowhere more apparent than in South Korea, where vast amounts of digital assets are traded daily. According to the statistics, in December last year, 21% of all Bitcoin transactions worldwide were made in Korean won, offering social mobility to all classes.
In step with the cryptocurrency markets themselves, the Korean government urges the establishment of the local Central Bank Digital Currency to promote financial inclusion and simplify the implementation of monetary and fiscal policy.
Today, we are taking an intense dive into investigating the birth of the Korean crypto DNA, local CBDC.
South Korea’s CBDC situation overlook
Announcement year: 2020
Status: Proof of concept (completed the first phrase of CBDC testing)
Main goal of the CBDC: advanced payment system and higher financial inclusion
Central bank: Bank of Korea (BoK)
Does Korea really need the CBDC?
The rocket growth of Korea’s digital economy:
As a developing country, Korea has one of the biggest Internet economies in the world. According to the research, South Korean were found to spend around 40 percent of their lifetime on the internet.
In fact, the internet economy growth rate from 2005 to 2010 is 44.6%, which is higher than the GDP growth rate of 35%, leading to the expenditure on e-commerce and online content.
Decline in the use of cash:
The gap between the use of cash and digital assets are promptly expanding leading to the cashless society to take a root in Korea.
In fact, the statistics shows that the cash use in Korea was only 19.8% as of 2018.
Following the Covid pandemic, Korea has been implementing various digital payments such as Kakao Pay, Naver Pay, Apple Pay, credit and debit cards as alternatives to the fiat money.
Moreover, the credit card use remains relatively high, leading to increased social costs in transaction fees while boosting digital currency growth.
Korea’s CBDC Timeline
April 2020: First step to the long run
On April 2020, Korea’s national bank Bank of Korea made a first attempt toward the introducing a digital currency with the pilot program. Another goal of the CBDC establishment to ensure that the local market is following up with the rapidly changing financial markets conditions.
August 2021: CBDC 1st phase test results
In the first phase of the project, a CBDC simulation environment was created, and the IT system necessary for CBDC basic work was implemented.
Experiment main purpose:
- Established as a hybrid CBDC operation method that is manufactured and issued by the central bank and distributed to users by participating institutions
- Test blockchain wallet owned by users to ensure the security of the funds
June 2022: CBDC 2nd phase test process and main range
While the first phase was focused on research and testing of central bank digital currencies’ basic role, the second phase, which was officially launched in June this year, includes a detailed concept of privacy protection, cross-border remittance, and offline payment that are implemented in a state where the Internet network is disconnected.
Apart from the CBDC, the South Korean government revealed that the Presidential Transition Committee is working toward the fast-evolving Security Token Offering (STOs) and Initial Exchange Offerings (CEOs) development for the digital space.
Thus, Delio, Korea’s leading crypto bank, has been deeply involved in the comprehensive discussion assisting the government on the importance of preoccupying the STO industry in Korea.
Learn more:
November 8, 2022: new milestones in the CBDC growth
Claiming that the local CBDC can be used as a backup payment method along with the fiat money in cases when telecommunication companies are failed to access the Internet, on November 8, BoK successfully finalized the interest payment.
The experiment revealed that a CBDC could handle up to 2,000 transactions per second. However, it was also revealed that distributed ledger technology, the foundation of cryptocurrency, currently needs to possess the scale required for a retail CBDC. In addition, the bank tested using its CBDC to buy non-fungible tokens (NFT).
Assessment and plans:
The BoK intends to continue working on the methods of the CBDC use implementing new IT and finance-related technologies.
Meanwhile, Delio has been actively participating in Web 3.0 and blockchain-focused discussions with Korean government authorities and working toward the industry’s fast expansion.
Sources: https://www.bok.or.kr/portal/bbs/P0000559/view.do?nttId=10068650&menuNo=200690
https://www.statista.com/outlook/co/digital-economy/south-korea#digital-revenue
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