Now digital coins instead of paper money? Payment available at convenience stores, bookstores, and delivery apps

The Ministry of Science and ICT, the Financial Services Commission, and the Bank of Korea joined hands to experiment with the distribution of digital currency (CBDC) to replace paper money.

On the 6th, the Ministry of Science and ICT, the Financial Services Commission, and the Bank of Korea announced, “Minister of Science and ICT Yoo Sang-im, Financial Services Commission Chairman Kim Byeong-hwan, and Bank of Korea Governor Lee Chang-yong held a business agreement ceremony to demonstrate digital financial services at the Bank of Korea’s main building in Jung-gu, Seoul.”

The key is to expand the application areas of digital currency issued by the Bank of Korea, and an empirical experiment involving up to 100,000 citizens will begin from early next year.

Based on the CBDC issued by the Bank of Korea, major banks will create deposit tokens (bank deposits converted into digital assets) that can be used to purchase actual goods. A new type of digital currency that is traded like real money is emerging, and major changes are expected in people’s daily lives.

In detail, a project is being visualized that will allow vouchers to be used as deposit tokens through smartphone QR payments instead of the previous paper-type culture, welfare, and education gift certificates (vouchers).

For this experiment, the Financial Services Commission newly designated seven banks, including KB Kookmin, Shinhan, Woori, Hana, Small and Medium Enterprises, NH Nonghyup, and Busan Bank, as innovative financial service providers on the 30th of last month. Starting early next year, each bank will begin issuing and storing deposit tokens through applications (apps) and use them to make payments at actual affiliated stores.

Minister Yoo said, “New digital financial services based on blockchain technology will provide real convenience and efficiency to people’s economic activities.”

Chairman Kim said, “The actual transaction test is a step to examine what convenience and benefits CBDC and deposit tokens can provide to the people’s daily lives.” He added, “Through the pre-check TF, we will check the preparation status of each bank, emergency measures, personal information, and financial transaction information. “We will carefully review protection measures,” he emphasized.

Governor Lee said, “Recent developments in IT technology can trigger a paradigm shift not only in the monetary system but also in domestic and international financial markets.” He added, “Amid such changes, we will lay a stable foundation for the emergence of new financial services that enhance the convenience of the people.” “It is a very important time to do this,” he said.

The banking sector is competing to find partners for digital currency experiments. According to the financial industry, KB Kookmin Bank has begun discussions to allow deposit tokens to be used at convenience stores 7-Eleven and Kyobo Bookstore. Shinhan Bank is promoting a project to allow deposit tokens to be used for delivery app ‘Daengkyoyo’, 7-Eleven, and Shinhan Youth Culture Pass vouchers. NH Nonghyup Bank plans to expand its cooperation front at Hanaro Mart, etc., taking into account the synergy effect with the Nonghyup distribution network.

Hana Bank is in discussions with 7-Eleven and is continuing discussions with Ediya for the Incheon area. Busan Bank began discussions with Ediya, a coffee shop in the Busan area.

Until now, banks could not treat deposit tokens as financial services because it was unclear under the law whether they were deposits or not, but the target bank was designated as an innovative financial service and was able to test the possibility of trading in the market. However, there is a stipulation that depositor protection must be applied to deposit token users as well.

It is expected that each bank will use mobile electronic wallet apps and QR codes dedicated to token payments to enable payments at affiliated stores. Because it is still in the testing stage, transfer of deposit tokens between users, such as remittances or transfers, is not expected to be allowed.