Over the next three months, South Korea will conduct a trial run of its newly launched central bank digital currency (CBDC), the digital won.
During this period, up to 100,000 citizens—ages 19 or older and holding an account at a participating bank—can convert their deposits into the CBDC.
These consumers can use digital won to pay for purchases at coffee shops, supermarkets, K-Pop merchandise stores, and delivery platforms. However, transactions will be capped at 5 million won ($3,416) during the pilot.
Participants will also be able to use the CBDC at 7-Eleven locations in the region. The convenience store chain will offer a 10% discount on all purchases made with the digital currency. According to a 7-Eleven executive, the company sees this initiative as an opportunity to embrace new technologies and accelerate its digital transformation.
Monitoring Privacy Concerns
Digital currencies offer powerful efficiency and security benefits, yet the CBDC model has faced pushback in many parts of the world. The crux of the argument against them is that CBDCs could grant governments too much insight into their citizens’ transaction histories, potentially compromising privacy.
As an alternative, many advocate for stablecoins—digital assets issued by crypto companies instead of central banks. Stablecoins are a better solution because they have both the stability of fiat currencies and the efficiency of cryptocurrencies.
Countering Stablecoin Dominance
On the flip side, many argue that stablecoins aren’t an ideal solution because all the leading stablecoins are based on the U.S. dollar. While there are stablecoins that track other currencies—such as the recently launched Mexican peso-backed stablecoin—these tokens lag far behind the billions in market capitalization enjoyed by the leading USD stablecoin issuers.
As stablecoins have proliferated, concerns have also emerged about the pivotal role that firms like Tether and Circle now play in the global economy.
For these reasons, many regions have pushed for CBDCs as alternatives to stablecoins. For example, a member of the European Central Bank’s board recently argued that because stablecoins were gaining traction in the region, the EU should issue a digital euro as soon as possible.
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