Bank of Korea to test CBDC on Samsung devices, not on iPhone

The Bank of Korea (BOK) will launch real-life, offline tests for a central bank digital currency (CBDC) project on Samsung Electronics Co.'s Galaxy series of smartphones, smartwatches and tablets, but it ruled out Apple's iPhone as a candidate device for its second-stage test for the digital currency "for now."

The South Korean central bank said on Jan. 24 that it has completed the first phase of its 10-month CBDC simulation project in December. Under the test conditions, the CBDC normally performed the basic functions such as manufacturing, issuing and distribution, according to the BOK.

In the second-phase pilot test that will run through June 22, BOK will develop technologies to store CBDCs in digital wallets installed on Samsung's flagship smartphones and other smart gadgets under the Galaxy brand.

"We are conducting the simulation, assuming CBDCs are stored on Galaxy phones and other devices," said Bank of Korea's head of the digital currency project team Yoo Hee-joon. 

"We have no plan to run the same test on iPhone, but it remains to be seen whether or not we can cooperate with Apple on this project."

Using Samsung's phones and other Galaxy series of smart devices, the central bank will test functions of payments using the digital currency stored on mobile devices without internet availability, and remittances to accounts in other countries. 

It will also explore technologies of paying for non-fungible tokens (NFTs) of artworks, songs and game items with CBDCs, as well as personal information protection enhancement. NFTs are unique digital assets that cannot be reproduced, altered or counterfeited as they are deployed on a decentralized blockchain.

The currency to be issued by the central bank in a digital form is exchangeable one-to-one with the country's national currency.

Regarding the possibility that CBDCs might increasingly replace cryptocurrencies in the NFT market, BOK's Yoo said: "We have no idea which method of settlement investors will prefer between CBDCs and cryptocurrencies."

"But we cannot assert that the introduction of CBDCs will propel the disappearance of cryptocurrencies."

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

In the second half of this year, the Bank of Korea will expand its CBDC pilot tests into the assessment and verification of its practicality and technologies in cooperation with financial services companies.

But the central bank has not decided yet whether to issue a CBDC, Yoo said.

"To issue a CBDC in a real environment, we need to carry out multiple tests and verifications on its systems regarding the security, scalability and interoperability," the central bank said in a statement on Monday. 

Central banks around the world are exploring CBDCs, as an alternative to contactless payment services such as Naver Pay and Kakao Pay in South Korea, as well as Apple Pay and Google Pay.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article.