100,000 individuals to try digital currency payments in nationwide pilot project April- June
South Korea is set to introduce real-world digital currency payments through a pilot project called “Project Han River” next month, as part of its efforts to keep pace with the rapidly evolving payment landscape, the country’s central bank announced Monday.
According to the Bank of Korea, the central bank has issued digital currency to participating local banks, which will, in turn, provide tokenized deposits to a total of 100,000 individuals. Participants will be able to use the deposits to purchase goods and services from April 1 to June 30.
Five major banks — Kookmin, Shinhan, Hana, Woori and NongHyup — will each invite 16,000 users to take part in the pilot, while the policy lender Industrial Bank of Korea and regional lender Busan Bank will gather 8,000 users each.
Korean residents aged 19 or older who hold savings accounts at the participating banks are eligible participants. Registration opens Tuesday, and users can set up electronic wallets and convert their savings into tokenized deposits starting April.
Each user will be able to hold digital tokens worth up to 1 million won ($680) at a time, with a total cap of 5 million won for the duration of the test period. Payments can be made by scanning QR codes, and both online and offline transactions will be supported at local bookstores, convenience stores, coffee shops, supermarkets and delivery platforms.
“For end users, the experience may not feel drastically different, as we’ve minimized changes compared to existing mobile payment services for convenience. But those participating in the pilot will get to experience future financial technology as early adopters and have the chance to provide feedback, ” said Kim Dong-sup, head of the BOK’s digital currency strategy team, during a press briefing Monday.
“For vendors, digital currency has advantages — payments can be settled instantly, much like cash, which improves liquidity. Also, the commission fees are much lower compared to other payment services, since card issuers are not involved.”
Kim highlighted the authorities could examine the digital currency’s potential to simplify complicated settlement procedures and the possibility of resolving benefit fraud through the pilot.
“This pilot is about building infrastructure where banks can explore new technologies in a safe and efficient environment while preserving the innovative qualities of tokenized assets,” Kim added.
The BOK and financial regulators — including the Financial Services Commission and Financial Supervisory Service — will use the results of the pilot to explore further real-world applications of digital currency.
“Digital currency allows for programmable payments — for instance, parents could restrict children’s pocket money to be used only on school supplies, or payments could be authorized only if a certain test score is achieved,” Kim explained. “This opens the door for public institutions, regional governments and charities to distribute subsidies or donations with conditions attached to ensure their intended use.”
silverstar@heraldcorp.com