South Korea is in the pilot phase. The Bank of Korea reported that it is “conducting a series of research and experiments on possible forms and designs of a CBDC.”

CBDC History and Development

In 2022, Bank of Korea governor Chang Yong Rhee delivered a speech titled, “Central Bank Digital Currency: What We Have Learned from a Recent Hands-On Experiment. Governor Rhee outlined the findings gained from a ten-month, retail CBDC pilot that explored the use of distributed ledger technology. Unlike many other central bankers, Governor Rhee said, “financial inclusion is not a key factor for considering potentially issuing a CBDC, as bank account penetration is almost 100% and various digital payment services are already well-developed.” Instead, he said the “top policy goal” was to prepare for the “growing presence of big techs in financial services.”

When discussing privacy, governor Rhee said, “We considered allowing holders of small amount of CBDC to … send and receive CBDC with a high degree of anonymity and privacy. However, we found that it would become almost impossible to carry out certain functionalities such as freezing wallets in the event of court orders. So, in our design for the experiment we chose to improve compliance at the sacrifice of privacy.”

Later in 2022, the Bank of Korea launched a CBDC landing page on its official website and published a progress report. On the landing page, the Bank of Korea reported that it is “conducting a series of research and experiments on possible forms and designs of a CBDC.” In the progress report, the Bank of Korea discussed the retail CBDC pilot previously mentioned by governor Rhee.

In addition to what was already said, the report noted that the CBDC pilot was built “in the cloud on a hybrid model featuring a two-tier structure where the BOK manages the CBDC lifecycle while participant nodes support CBDC circulation and provide end user services, including digital wallets and KYC3 requirements.” The pilot operated from August 2021 to June 2022. There were four core findings. First, efficiency decreased as both the number of nodes and the number of users increased. Second, while some issues persisted, second-layer solutions built on top of the network may be able to mitigate the issues. Third, offering anonymity reduced the efficiency of transactions. Fourth, and finally, more research was needed.

In 2024, reporting in the Korea Times shared that the Bank of Korea plans to launch a new pilot in late 2024 that involves 100,000 South Korean citizens. However, given that this “pilot” would involve the general public, this move would put South Korea in the launch phase if it does take place.

Human Rights and Civil Liberties Concerns

South Korea earned an 83 out of 100 in Freedom House’s 2023 Freedom in the World report. Although there have been some reports of issues around the treatment of human rights and civil liberties, the most relevant concern is the presence of government corruption.

“[Officials] sometimes engaged in corrupt practices with impunity, and there were numerous reports of government corruption at all levels,” according to the U.S. Department of State. The existence of pervasive corruption is a major concern with CBDCs because it calls into question any promises that might be made by the government to limit surveillance, control, or other risks of CBDCs. Furthermore, the existence of corruption calls into question whether CBDC policies might be designed to exert political favoritism through subsidies, price controls, or other targeted restrictions.

For additional information on concerns regarding violations of human rights and civil liberties, see the following reports by Amnesty International, Financial Tyranny Index, Freedom House, Human Rights Watch, Privacy International, and the U.S. Department of State. For additional information on concerns regarding the risks of CBDCs, see the following webpage and report by the Cato Institute: The Risks of CBDCs and Central Bank Digital Currency: Assessing the Risks and Dispelling the Myths.

For additional information regarding metrics, the methodology page explains each of the data points and provides their respective sources.