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Blockchain

BOK, Samsung to develop offline CBDCs using Galaxy devices

This is a follow-up to their successful test of offline CBDC payments and remittances using NFC technology in 2022

By May 16, 2023 (Gmt+09:00)

3 Min read

(Courtesy of Getty Images)
(Courtesy of Getty Images)

South Korea’s central bank and Samsung Electronics Co. have joined hands to further advance the country’s offline central bank digital currency (CBDC) transaction technology amid intensifying global competition to lead secure and reliable offline CBDC technology.

Bank of Korea (BOK) and Samsung Electronics on Monday signed a memorandum of understanding to work together to establish a secure and seamless offline CBDC transaction system that can be used on the latter's Galaxy mobile devices.

The latest agreement comes after Samsung Electronics successfully demonstrated reliable offline CBDC payments and remittances with the near-field communication (NFC) technology during its participation in the BOK-led CBDC technology second research project last year thanks to Samsung Electronics’ Secure Element security chip technology embedded in its mobile devices.  

Using the chipset known to offer strong protection against physical or side-channel attacks and the NFC technology, the BOK and Samsung Electronics will further advance offline CBDC technology to ensure more reliable and secure digital currency transactions in internet-free zones using Samsung Electronics’ Galaxy smartphones and watches.

“Our offline CBDC technology jointly developed with Samsung Electronics is the world’s first of its kind developed by a central bank,” said Lee Seung-heon, BOK’s senior deputy governor, who attended the MOU signing ceremony on Monday.

GLOBAL CBDC RACE

CBDCs are digital currencies issued and operated by central banks, using blockchain or distributed ledger technology.

A global race to lead the CBDC transaction technology has heated up, with the world’s two largest economies the US and China on the frontline. CBDCs are considered more secure and reliable than privately issued and decentralized cryptocurrencies like Bitcoin, which lack legal protection for their value or during cross-border transactions.

Expectations are growing that CBDCs could replace hard cash as cash use has been steadily declining across the world while people’s interest in digital assets like cryptocurrencies is growing. Central banks expect CBDCs to play a stabilizing anchor role in local digital payment systems.     

Lee Seung-heon, BOK’s senior deputy governor, (on left) and Choi Won-joon, executive vice president of the mobile experience division of Samsung Electronics, at an MOU signing ceremony on May 15, 2023. (Courtesy of Samsung Electronics)
Lee Seung-heon, BOK’s senior deputy governor, (on left) and Choi Won-joon, executive vice president of the mobile experience division of Samsung Electronics, at an MOU signing ceremony on May 15, 2023. (Courtesy of Samsung Electronics)

Especially, central banks around the world are actively exploring offline CBDCs because they are accessible even without a network connection, increasing financial inclusion and resilience. They most resemble cash.

Lee hoped the BOK’s partnership with Samsung Electronics can make Korea the global leader in offline CBDC technology.

Choi Won-joon, executive vice president of the mobile experience division of Samsung Electronics, also expected the company’s security technology to contribute to a leap in global offline CBDC technology. Choi signed the MOU with Lee on Monday.

The BOK already tested cross-border remittances linking multiple CBDCs in 2021 and 2022.

The Korean central bank entered two-phase CBDC simulation projects in August 2021 in collaboration with Ground X, a blockchain unit of Kakao Corp., Kakao Bank, Kakao Pay, Samsung Electronics and Samsung SDS Co.’s subsidiary S-Core Co.

In the second half of last year, the central bank invited financial services companies to join its CBDC project in the assessment and verification of the digital asset’s practicality.

It also has set up a virtual anti-money laundering and counter-terrorism financing mechanism to collect transaction data.

Write to Jin-gyu Kang at josep@hankyung.com

Sookyung Seo edited this article.
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