Central banks around the world have been keen on developing their own cryptocurrencies for a few years now, ever since crypto adoption started to grow, and the People’s Bank of China (PBoC) revealed that it has been working on creating a CBDC for several years, and was ready for testing.
Suddenly, everyone sprang into action, either researching the crypto industry and the impact of a CBDC, or starting to build their own. South Korea’s central bank is no exception, but, according to a recent announcement, it will be working on its CBDC pilot alongside its local tech giant, Samsung Electronics.
Samsung is a name that everyone in the world knows, most famous for its smartphones, which run an Android OS. The company has been experimenting with blockchain for quite some time, even making several blockchain-friendly models of smartphones over the last several years.
With some experience in crypto, the company was a perfect choice for the Korean central bank — it is a fully regulated, well-known local tech giant with experience in the sector that the bank is interested in.
Samsung and BOK to work on a CBDC creation
The new partnership, as well as Samsung Electronics’ participation in the development of the BOK’s CBDC pilot, was originally reported yesterday, August 11th, by The Korea Times. The report stated that Samsung will use its Galaxy smartphone to test the functionality of the upcoming central bank digital currency, and that the focus of the project will be on remittances.
This makes sense, as cryptocurrency transactions are almost instant, whether locally or internationally, and they come at much cheaper fees than any traditional payment method that is in use today. As such, using it to transfer money into the country from abroad is likely going to be one of the primary use cases for this, as well as other CBDCs.
The thing that Samsung itself wishes to discover through participation in this project is whether it is possible to conduct payments via smartphones by using the CBDC without any internet availability. This information came from an unnamed source, and it essentially means that Samsung will be exploring offline crypto payments. If the company can discover a way to use cryptos without access to the internet, that could be a game-changing discovery for the crypto industry at large.
Of course, that is only one angle of the research and development of the CBDC. Remittances to other phones directly will also be tested, as well as payments to other connected bank accounts.
Two phases of testing and development
The company’s executives noted that the pilot will consist of issuing and distributing the central bank digital currency, after which the tech giant will be monitoring how the process works in virtual environment. There will be two separate phases of testing, where the first phase will revolve around determining exactly what technology is required in order to make online and, if possible, offline CBDC payments. This first phase will start in August 2021, and it will end in December of this year.
After that, the second phase will commence, and this one will last slightly longer — around six months. Starting in January 2022 and ending in June of that year, Phase 2 will focus on transactions and settlements in real life.
It should also be noted that the Bank of Korea not only teamed up with Samsung, but has also been inviting companies to compete for an opportunity to work with it on the CBDC development back in July of this year. The opportunity was eventually granted to a blockchain subsidiary of Kakao, called GroundX. With Kakao being South Korea’s internet giant, its subsidiary was reputable and competent enough to get the job.