Financial Services Commission: "By the End of Next Year, Banks to Issue 'Deposit Tokens'"

Central Bank Digital Currency (CBDC) Usability Test Briefing
Future Currency Infrastructure Trial

Kim So-young, Vice Chairman of the Financial Services Commission, attended the 'Central Bank Digital Currency (CBDC) Usability Test Briefing' held at the Bank of Korea on the 4th and stated, "Banks plan to issue ‘deposit tokens’ based on deposits to customers who wish to use them and actually utilize them starting from the end of next year." Vice Chairman Kim explained, "The CBDC usability test involves the Bank of Korea issuing an ‘institutional digital currency’ that can be used for interbank fund transfer transactions, and participating financial institutions issuing and using tokens as payment means linked to this, thereby testing the future currency infrastructure."

Kim So-young, Vice Chair of the Financial Services Commission, is speaking at the joint press briefing on the plan to promote the usability test of CBDC held on the afternoon of the 4th at the Integrated Annex of the Bank of Korea in Jung-gu, Seoul. Photo by Joint Press Corps

Chairman Kim said, "The payment and settlement ecosystem through institutional CBDC and deposit tokens, whose test plans are announced here today, has various implications such as supporting smooth and secure transactions of digital assets like tokenized securities and improving the efficiency of the current payment and settlement system through new technologies." For example, based on the results of this usability test, if tokenized payment methods are gradually expanded in the future, the transfer of tokenized securities and the payment of their consideration will be conducted in real-time, eliminating settlement risks arising from the time gap between asset ownership transfer and payment.

Additionally, by utilizing programmable functions such as smart contracts, it is possible to block risks such as errors or fraudulent receipt of payments even in cases with diverse and complex payment and settlement conditions. It also serves as a standard for suggesting regulatory directions related to stablecoins, which currently raise various concerns due to risks associated with issuers and value maintenance.

Chairman Kim stated, "Even though this usability test is literally a ‘test,’ it directly affects the rights of the general public participating, so the Financial Services Commission and the Financial Supervisory Service plan to conduct the test within the framework of the current financial system to ensure there are no issues in protecting the rights of the public."

To this end, the Financial Services Commission decided to clarify the legal basis for banks to issue deposit tokens. Currently, there is no clear legal basis for banks to tokenize deposits. Therefore, through the financial regulatory sandbox, legal grounds will be clarified to allow banks to conduct this work only for this experiment linked to the Bank of Korea’s institutional CBDC, and additional conditions necessary for user protection will be imposed.

Measures will also be taken to ensure the legal effectiveness of deposit token transactions. Currently, banks guarantee the legal effect of transactions by recording transaction details such as deposits in ledgers (books). Therefore, during this test, the records on the distributed ledger and the bank’s ledger will be linked 1:1 in real-time to stably implement the legal effect of payment and settlement.

User protection measures will also be prepared. Since this is a payment and settlement test in a form different from the existing one, concerns exist regarding personal information issues such as leakage of transaction records, guarantees for exchange with other assets, and depositor protection related to the protection of users’ property rights. During the detailed model design process, sufficient user protection measures such as encryption of transaction records, technical measures for access rights, and explanatory measures by banks regarding users’ property rights will be prepared.

Vice Chairman Kim said, "This CBDC usability test is a process of ‘well-regulated innovation’ that fosters innovation momentum while preventing consumer damage and market disorder," and added, "The government will continue to proactively organize systems to accommodate new changes, just as it has established laws on virtual assets and regulatory frameworks for tokenized securities one by one, and will continue new tests based on firm guarantees of the rights of the public."

Lee Myung-soon, Senior Vice Chairman of the Financial Supervisory Service, is speaking at the joint press briefing on the plan to promote the usability test of CBDC held on the afternoon of the 4th at the Integrated Annex of the Bank of Korea in Jung-gu, Seoul. Photo by Joint Press Corps

Lee Myung-soon, Senior Vice President of the Financial Supervisory Service, also attended the event and said, "According to a BIS survey announced in July this year, more than half of the world’s central banks are conducting CBDC pilot projects, and it is expected that more than 24 countries will introduce CBDCs by 2030." She added, "This usability test is another meaningful step toward building Korea’s future currency infrastructure based on past achievements."

She continued, "The Financial Supervisory Service will do its best in its given role to ensure the smooth execution of this test," and stated, "We will closely monitor not only the impact on the financial market but also the impact on the virtual asset market, for which regulatory frameworks are currently being prepared, and actively participate in future discussions."

This content was produced with the assistance of AI translation services.