Bank of Korea Opens an Auction for CBDC DLT Technology Provider
The Bank of Korea (BOK) issued a request for bids. The bids seek companies that can become the technology supplier for a Central Bank Digital Currency (CBDC). The bank is based on distributed ledger technology (DLT) and provides a lot of information.
Bank of Korea had earlier announced trials for a digital won, and several Korean companies had lobbied to be included.
For example, it has been claimed that Bank of Korea conducted CBDC conversations on digital currency custody with the Klaytn public allowed blockchain and Hyundai HDAC.
Shinhan Bank of South Korea completed a CBDC demo with LG CNS; however, it was not commissioned. As a result, the bank was invited to join Hedera Hashgraph’s governing council.
The latter has a governance structure similar to Klaytn in that only a small number of approved large firms are allowed to write to the ledger. It also has cheap transaction costs.
Korea’s simulated CBDC will have a two-tier structure with the central bank issuing the currency and financial institutions performing the distribution.
The creation, issue, and redemption of digital currency are all part of the initial phase. Issuance will take place in the secure computing environment of the central bank, which is physically isolated from the internet.
It will then be issued to an institution’s electronic wallet in exchange for its primary bank account being debited. And salvation operates similarly, but in the opposite direction.
During the first phase, some fundamental use cases will be tested. As a result, it incorporates end-user wallets for making smaller payments, such as smartphone apps and secret key storage.
One of the capabilities to be evaluated is the ability to exchange bank deposits for CBDC. The most crucial use case to be replicated is making payments with digital currency.
If the first phase goes smoothly, the second will include cross-border remittance, offline payments, regulatory compliance, and interaction with systems for purchasing digital assets, such as securities, artworks, and other intellectual property.
The second phase also includes the testing of privacy-enhancing technology on a more technical level (PET). Although no specific PETs were named, Zero-Knowledge Proofs are the most prevalent in the blockchain realm.
Smart contracts will also be used to investigate programmable money. The central bank wants to be able to freeze an electronic wallet for law enforcement purposes.
It hopes to finish the capabilities for securing personal information by February 2022, despite the December deadline for the first phase. The project has a total budget of Won 49.6 billion ($44 million).