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Korea to Experiment with Digital Vouchers Based on CBDC-Based Deposit Tokens – Ledger Insights
Yesterday the Korean Ministry of Science and ICT and the Korea Internet & Security Agency (KISA) announced an investment project to promote the domestic blockchain industry. It is committing 20 billion won ($14.5 million) to 14 projects. One of the largest public sector projects involves central bank digital currency (CBDC) and digital vouchers.
That initiative was among only three projects given a budget of 3 billion won ($2.2 million). Last year the Bank of Korea presented a Wholesale CBDC project to support tokenized deposits. Bank tokens will likely take center stage, with CBDC used exclusively for interbank settlement.
The central bank is developing a voucher program for use on smartphones, which can be used for welfare, culture, education and other services. Today, most vouchers are based on paper or plastic cards. They are also prone to fraud. Using a digital application aims to tackle fraud and make the settlement process much easier.
This project looks similar to Singapore money intended for a purpose (PBM), which also include tokenized bank money. With conventional vouchers, there is an entire process for merchants to collect them from customers, bundle them, and submit requests for discounts granted at the checkout. With these digital currency initiatives, however, the seller receives instant payment as soon as the voucher is presented. This way there is no need for grouping, attestation or reconciliation.
However, if you think about how point-of-sale registers work, you may need to record a different type of payment because the payment isn’t cash, card, or a mobile wallet. If the Korean initiative did not target everyday retail payments, it could sidestep this issue.
On a general level, these types of applications could encourage much wider use of vouchers because they eliminate a lot of friction.
Other Korean blockchain promotion projects
Meanwhile, Korea’s “Blockchain Industry Promotion Strategy” will support six public sector and eight private sector projects. The other public sector project with a budget of 3 billion Won involves digital badges to certify academic achievements or work experience. The Korea Employment Information Service plans to integrate with major job portals to make digital badges useful.
Among the eight private sector projects, only CP Labs received a budget of 3 billion won. For companies that don’t want to hire specialized staff, the goal is to enable blockchain services through simple API connections. The hope is that it will reduce development times and costs. However, this is likely to only work for standardized services, such as credentials, tracking, and potentially payments.