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Bank of Korea develops CBDC cross-border remittances solution

Tuesday 8 November 2022 13:55 CET | News

The Bank of Korea (BoK) has developed and tested a program that facilitates cross-border remittances by linking different central bank digital currencies (CBDC) from other countries.

 

The central bank had recently completed a 10-month experiment into a digital South Korean won, as authorities revealed. During the project, the bank also tested the use of its CBDC to purchase non-fungible tokens (NFT).

Several economies such as the US, UK, and European Union have been exploring the issuance of CBDCs, while China has already carried out several trials. South Korea began its CBDC trial in 2021 and completed the first of two phases by January 2022.

Despite the progress, as authorities state, they realised that there is no such thing as perfect technology or CBDC designs that can satisfy all the various goals and expectations at the same time. For instance, the bank decided to improve compliance at the sacrifice of privacy.

The Bank of Korea (BoK) has developed and tested a program that facilitates cross-border remittances by linking different central bank digital currencies (CBDC) from other countries.

To support this endeavour BoK established a virtual money laundering and terrorism financing monitoring system and will facilitate data submission. The experiment found that a CBDC could process up to 2,000 transactions per second. However, it also found that distributed ledger technology, which underlies crypto, does not yet have the scalability needed for a retail CBDC. If that is the case, it may be better to use the standard centralised ledger database.

South Korea’s blockchain evolution

In October the country’s government announced plans to offer citizens with a smartphone blockchain-secured digital identity in a wish to boost economic growth. Authorities believe that with this move, services who have not yet been able to have a full transition into the online space will now be able to do so.

To identify themselves, Koreans are currently relying on resident registration cards, with the proposal aiming to embed those IDs with an app into mobile devices. Korea is set to launch digital IDs in 2024, looking to have them adopted by 45 million citizens within two years.

When it comes to other aspects of the blockchain industry, such as crypto exchanges, South Korea is working on preventing fraudulent activities. Back in August the Korea Financial Intelligence Unit (KoFIU) reported 16 virtual asset service providers to the investigative authorities for operating without the necessary registrations in the country.

At the time, the 16 firms were found to have business operations with Korean clients, without obtaining a registration in the country. The activities conducted by these businesses include hosting and promoting Korean-language websites targeted at Korean consumers that allowed purchasing cryptocurrencies with credit cards.

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Keywords: cryptocurrency, cross-border payments, CBDC, remittances
Categories: DeFi & Crypto & Web3
Companies: Bank of Korea
Countries: Korea, Republic of
This article is part of category

DeFi & Crypto & Web3

Bank of Korea

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