Bank of Korea moves toward issuance of digital currency. The institution runs a 22-month pilot test to verify whether a digital currency is stable enough to replace paper money.

The Bank of Korea (BOK) said Monday it was readjusting a plan for the possible issuance of a central bank digital currency (CBDC), in line with similar steps being taken by developed countries such as the United States and Japan.

The BOK said it would carry out a 22-month pilot test to verify whether a digital currency was stable enough to replace paper money. The drive, which started in March, will last until the end of 2021, during which period the central bank will focus on checking technical issues in running the pilot system.

The announcement reflected recent changes in stance in major developed countries ― including the U.S., Japan, the United Kingdom and Canada, the BOK said.

„The U.S. and Japan had had no plans to issue a CBDC in the near future, but they changed their stance recently to enhance research in the emerging area,” an official from the BOK said.

Other major Western countries have also started to recognize the importance of taking preemptive steps toward CBDC research. In January, the six central banks from Canada, the United Kingdom, Japan, the European Union, Sweden and Switzerland established a joint research group on a CBDC.

In Asia, China is the most active player in bracing for the possible looming currency paradigm shift. The People’s Bank of China recently said the development of a CBDC was its „top priority.”

„The BOK also decided to remain proactive in the rapid shift in payment environments here and abroad, so we are going to set up the CBDC pilot system and check technical and legal issues surrounding its introduction here,” the official said.

But the central bank said the CBDC introduction would not be in the near future, as demand for cash remains constant and payment service markets are competitive enough for customers to rely on for now.

The latest initiative will be driven by the BOK’s digital currency research team which was established under its financial payment division in February. The central bank also plans to run an advisory group by teaming up with internal and external experts to review technical and legal details.

The BOK will also tighten monitoring of any shifts in the external environment surrounding the CBDC research. It also noted it would enhance exchanges of research results with major overseas central banks.