Digital won will pass extensive testing by the Bank of Korea staff. Per the official announcement, the program will last until December 2021.
South Korean businesses and officials were talking about the government-backed stablecoins since December 2018. The Central Bank was hiring different industry experts. The experts prepare research on the CBDC related progress in other countries. Also, they propose own legal initiatives to improve the project. Now the Central Bank seems to be working really closely on its digital won.
The design is not the classic blockchain with open nodes participation. Contrary to the classics, the Central Bank plans to issue a stablecoin. Stablecoins are better at volatility (‘almost’ zero volatility), but worse at decentralization. However, as the example of many ERC-20 tokens and USDT shows, you don’t have to attract much of the participants. You just need to engage the key ones.
Legal Side of the Korean Digital Won
The Korean lawmakers introduce a schedule with the strict deadlines for the development of a digital won. In the first five months, the blockchain coders should prepare design and requirements. From April to August of 2020 the technology will pas first initial review. Then, business process analyzing and consulting will eat 4 more months on Q4 2020.
Usually, the CBDC introduces a new level of payment anonymity and finality. Compared to old banks, Bitcoin Cash or Ethereum work much faster and cheaper, in most of the cases. The pilot system construction and testing are set for 12 months and will start in January 2021. Thus, in case all the deadlines are met, we will witness South Korea presenting CBDC at the beginning of 2022.
The legal framework must be improved to fit the new standards. So that the bankers would know what to do with the cryptocurrency. That’s why the Bank of Korea Act will soon experience groundbreaking changes. Per the announcement, South Korea is stepping on rails of hardcore cryptocurrency regulation. The times of ‘crypto anarchy’ seem like changing into the times of ‘crypto governing’.
South Korea Follows Worldwide Central Banks
The Bank of International Settlements (BIS) rolls as ‘the central bank for the central banks’. It claims they started researching into the cryptocurrency. The coronavirus case makes the banks work even faster to introduce contactless cash. The BIS stated:
“Resilient and accessible central bank operated payment infrastructures could quickly become more prominent, including retail central bank digital currencies (CBDCs).”
Other central banks seem like they want to be ahead of the curve too. The American government now in discussions of three separate Digital dollar bills. French Central Bank has launched a test Digital Euro for inner settlements. Russian Central Bank is testing a few of the government-controlled blockchains. And the ECB head Christine Lagarde is sure that the euro will be on the blockchain rails soon. Otherwise, she hints, the big banks could lose the magic of printing monopoly.
Jeff Fawkes is a seasoned investment professional and a crypto analyst. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.