Why Three Tech Behemoths Are Vying to Test Korea’s CBDC
South Korean tech giants have lodged three bids to become the first private firms ever to pilot the Bank of Korea (BOK)’s central bank digital currency (CBDC) prototype.
As previously reported, the BOK will pick a winner from three consortiums and solo bids submitted earlier this month by subsidiaries of the chat app giant Kakao, the search engine powerhouse Naver and the telecoms provider and conglomerate SK.
All three have considerable crypto and/or blockchain interests: Kakao, whose Ground X blockchain subsidiary submitted its bid, was an early investor in the Upbit crypto exchange and operates the Klaytn blockchain protocol, as well as the native klay (KLAY) token.
SK, meanwhile, has been active in the field of blockchain technology and local stablecoins – issuing its own high-speed private network and a number of tokens used by merchants, government bodies, and citizens of several major South Korean cities. Its bid was officially lodged by the SK C&C subsidiary.
And Naver, which founded Line – a chat app with crypto exchanges in Japan and elsewhere in Asia – has also been ramping up its own blockchain operations. The firm launched its bid via its Line Plus subsidiary. LG CNS, the IT services arm of the electronics giant LG, is reportedly partnering on this Line Plus-led consortium.
The winning bidder will need to begin work on the project in August and wrap up in June 2022. The BOK, like most other central banks, is still yet to commit to issuance.
However, the media outlet DDaily attempted to answer the question of why these high-profile tech giants are so keen to win the tender (to be announced by the end of July) when the BOK-issued budget for the project is a relatively small USD 4.8m.
Baek Hoon-Jong, the Chief Operating Officer of Sandbank, a digital asset-related financial service, was quoted as explaining that CBDCs potentially allow firms to go beyond their current e-pay platforms and branch out into the world of finance.
The move would potentially allow all three to “boost their technological prowess” and link their blockchain operations with their fledgling finance arms.
Kakao has launched neobanking services in addition to its Kakao Pay service. Naver Pay is also an ongoing project for both Naver and Line since it was launched in 2014.
The Ground X bid, the media outlet added, proposes a collaboration with the blockchain scalability service provider Onther – a factor that could be of benefit when dealing with “huge quantities” of transactions on a BOK network.
Ground X could also potentially leverage its existing partnership with the American blockchain heavyweight ConsenSys, in addition to numerous domestic blockchain partners. ConsenSys last year unveiled a CBDC offering that it claims is based on ConsenSys Quorum, which it acquired from JPMorgan.
The Line Plus bid, meanwhile, proposes a partnership with Naver Financial, the operator of Naver Pay, as well as a potential tie-in with Line Financial Blockchain. The latter has already been working on CBDC solutions, and boasts a platform with a transaction speed of up to 2000 transactions per second. The media outlet added that this is “comparable to traditional financial service” speeds. Line Pay – already a big hit in Japan – has also been developing CBDC tools.
LG CNS has also been exploring its own CBDC solutions.
And SK, finally, has ties with ConsenSy, too. It also has a powerful partner in the form of the Korea Simplified Payment Promotion Agency (literal translation), the operator of the Zero Pay contactless payment solution used by the Seoul Metropolitan Government. Although not a fully blockchain-powered solution, Zero Pay does make some use of blockchain innovations, and plans to ramp up the system’s blockchain features were unveiled last year.
The media outlet added that SK was also playing its cards close to its chest, and did not add details of other companies that may be involved in its own bid.
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