South Korea's central bank, the Bank of Korea (BoK), plans to start testing the usage of central bank digital currency in 2021, the Korea Herald has learned.
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The BoK reportedly wants to examine practical distribution and circulation of CBDC in the final part of the three-step pilot program. Previously, the regulator analyzed the potential circulation process and discussed design of the asset. The BoK will also use the blockchain technology to track digital currency transactions.
However, the practical test of CBDC's usage does not mean that the bank is ready for public launch of the asset.
In February 2019, the Central Bank of South Korea said that the launch of CBDC could have "negative consequences on the South Korean financial system."
According to the bank, such kind of national asset might cause a liquidity shortage and pushing up interest rates. The BoK also admits that the launch of CDBC might replace demand deposits service that is held by local commercial banks as people might consider the national digital currency to be far safer.
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