The Bank of Korea (BOK) presented the first results of its central bank digital currency pilot project, which tested some of the basic functions such as distribution and issuance.
The South Korean regulator said the first phase was successfully completed in December 2021, four months after launching a research process on the practicalities of launching its CBDC in a test environment. To this end, it has allocated 4.9 billion won ($4.4 million) and selected internet giant Kakao’s blockchain arm, Ground X, as the technology provider for its government-controlled cryptocurrency. .
Although the pilot was not a commitment to issue a central bank digital currency, the move to do so in August was the first exploratory step into Asia’s fourth-largest economy. At the time, the BOK cited a desire to bring the country closer to a cashless society with significant benefits for businesses and consumers.
The second phase is currently underway, YNA news reported. It aims to simulate key aspects of a potential commercial-scale CBDC system, including cross-border remittances, retail payments, and offline payments.
“We will confirm the ability to operate various functions, such as offline settlements, and the application of new technologies, such as the one to enhance privacy protection in the second phase of the test,” the BOK said. in a press release.
Central banks in China, the UK, Sweden, and almost all major economies are studying or developing a CBDC to modernize their financial systems. The Chinese e-CNY is closest to completion.
The news follows the postponement of planned taxation on digital asset gains by the South Korean legislature.
A 20% tax on gains made from cryptocurrency trading — if the total income is more than 2.5 million Korean won (about $2,000) — was originally scheduled to go into effect this month. If the amendment is passed by a parliamentary vote, the new tax rules will come into force on January 1, 2023.
Historically, South Korea is one of the hottest investing and trading markets for cryptocurrencies. However, authorities have been reluctant to regulate the virtual asset class, due to their belief that cryptocurrency regulation could lend legitimacy to the sector.
Separately, nearly 30 cryptocurrency exchanges in South Korea have filed with the country’s regulators to continue operating in the country. Out of this figure, local industry media identified the four largest crypto exchanges – UPbit, Bithumb, Coinone and Korbit.