South Korea’s Central Bank Revives CBDC Plans to Pay $79.3 Billion in Government Subsidies
The Bank of Korea (BOK), the country’s central bank, has announced plans to utilize its Central Bank Digital Currency (CBDC) to pay out over 110 trillion WON (approximately $79.3 billion) in government subsidies. This move comes as a surprise, as the BOK had previously put CBDC tests on hold in favor of developing stablecoin alternatives.
According to a report by the South Korean newspaper Hankook Ilbo, BOK Governor Rhee Chang-Yong revealed the plans during a press conference on August 28. The subsidy payments will be part of a new pilot project for digital currency, which is expected to improve the efficiency and transparency of subsidy payments.
CBDC Pilot Project: A New Approach
The CBDC pilot project, also known as the Greater Han River project, aims to utilize blockchain technology to prevent fraudulent use and improve the efficiency of subsidy payments. The BOK and the Ministry of Strategy and Finance plan to issue contractors with CBDC tokens instead of traditional bank transfers or vouchers.
According to Rhee, the use of digital fiat for paying subsidies will enable better management of subsidies to main contractors if they complete agreements with subcontractors. The BOK believes that blockchain technology will help track the money and ensure it is not abused.
Accelerated Plans and Legislative Challenges
Rhee suggested that the BOK’s StableCoin pivot did not mean the end of CBDC plans. In fact, the governor stated that the BOK plans to “accelerate” the Han River project once legislators have completed creating new crypto and stablecoin laws.
However, the progress of StableCoin legislation has been slowed down due to disagreements among lawmakers on whether technology companies should be allowed to issue KRW-pegged stablecoins. Conservative votes have asked Seoul to restrict the issuance to commercial banks, while progressive opponents argue that such a move would stifle innovation.
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