LG CNS to Develop System for Korean Tokenized Deposits
The Bank of Korea (BOK) has awarded a contract to LG CNS to develop a system for a wholesale central bank digital currency (CBDC) for upcoming trials. This development follows the October announcement of two wholesale CBDC trials, one involving banks issuing tokenized deposits and the other using the CBDC for securities settlement on distributed ledger technology (DLT) platforms.
Scope and Timeline of the LG CNS Contract
The contract with LG CNS, extending to March 2025, includes a budget of KRW 9.68 billion (approximately $7.45 million). The tokenized deposit trial, involving 100,000 participants, is slated to begin in September or October 2024. This trial aims to explore the use of a wholesale CBDC for interbank settlement.
Background and Previous Collaborations
In 2020, LG CNS collaborated with Shinhan Bank to develop a blockchain-based digital currency platform in anticipation of a potential retail CBDC. At the time, the BOK was considering retail CBDC trials, with both LG CNS and Shinhan Bank expecting to be involved.
BOK’s Current Stance on Retail CBDC
Following the completion of two phases of retail CBDC trials, the BOK currently does not see the necessity for a retail CBDC. However, the bank recognizes the potential for programmable payments and is exploring the concept of purpose-bound money, similar to Singapore’s model. This approach would involve banks offering purpose-bound money backed by customer deposits.
Exploring Offline CBDC with Samsung
Additionally, the BOK announced a collaboration with Samsung in May to investigate offline CBDC capabilities, further expanding its exploration into the potential applications of digital currencies.
The Evolving Landscape of CBDC in South Korea
These developments mark a significant step in South Korea’s journey towards understanding and leveraging CBDCs, both in retail and wholesale capacities. With LG CNS’s involvement, the BOK aims to explore innovative financial technologies and their potential to revolutionize traditional banking and settlement systems.