“Starting in September, money deposited in banks will automatically convert to CBDC.” “By signing up for the Youth Future Savings, you agree to the CBDC conversion.”
Recently, such claims have been circulating on social media and online communities. Some have even suggested that individuals should move their salary and living expense accounts elsewhere or disconnect their accounts from open banking and mobile payment services.
To clarify, there will be no automatic conversion of money deposited in banks to central bank digital currency (CBDC) starting in September. Additionally, the process of signing up for financial products like the Youth Future Savings does not involve unknowingly participating in a CBDC pilot project through terms and conditions or consent to provide personal information.
Concerns surrounding CBDC have persisted since the Bank of Korea began real transaction testing. According to a petition submitted to the National Assembly on September 10, there have been eight petitions opposing the introduction of CBDC since the first real transaction test of Project Han River began in April of last year, accumulating approximately 420,000 signatures. Even during the announcement of Phase 2 of Project Han River in July and August, petitions calling for a cautious approach due to potential personal information exposure and insufficient public consultation continued to emerge.
The controversy stems from the digital currency real transaction test, Project Han River, being pursued by the Bank of Korea and the banking sector. In Phase 1, the Bank of Korea issued an “institutional CBDC” for transactions between financial institutions, and banks tested whether they could issue “deposit tokens” based on this to facilitate actual payments and transactions.
Phase 2 will expand the scope of the experiment. Nine banks, including KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, IBK, Busan, Gyeongnam, and iM Bank, will participate to test not only payments but also peer-to-peer transfers and automatic deposit and withdrawal conversions.
One expression that has fueled misunderstandings is “automatic deposit and withdrawal conversion.” It may sound like banks will arbitrarily tokenize customers' account funds, but the actual function is different. When a customer participating in the pilot project makes a payment or transfer using deposit tokens, if the balance in their token wallet is insufficient, only the necessary amount will be drawn from their linked deposit account and converted into deposit tokens.
This does not mean that the entire balance of a salary or savings account will be automatically tokenized. The tokens used by consumers are not CBDC issued directly by the Bank of Korea but deposit tokens issued by the respective banks based on customer deposits. The claim that cash in an account will suddenly change to CBDC is fundamentally different.
Claims related to the Youth Future Savings are also inaccurate. Signing up for policy financial products and participating in Project Han River are separate processes. Simply enrolling in the Youth Future Savings or receiving government support does not mean that the deposits in that account will be converted to CBDC or deposit tokens. Consent for providing personal and financial information during the financial product enrollment process is distinct from consent to participate in the digital currency pilot project.
There will be no immediate changes to existing financial services. Customers not participating in Project Han River can continue to use their salary accounts, living expense accounts, savings, and loan accounts as they do now. There will be no changes to how salaries are deposited or how account balances are displayed.
Merely linking accounts to open banking or mobile payment services like KakaoPay and Naver Pay does not mean participation in Project Han River. Existing account linking services and the deposit token pilot project are separate services.
The banking sector believes that if deposit tokens become established as actual financial services, there could be changes in payment methods centered around account transfers, cards, and mobile payments. However, Phase 2 of Project Han River is not the formal introduction of CBDC but a pilot project to verify the payment and transfer functions of deposit tokens issued by banks based on institutional CBDC.
Therefore, there is nothing immediate that consumers need to do. There is no reason to move accounts or forgo signing up for the Youth Future Savings due to concerns about CBDC, nor is there a need to disconnect accounts linked to open banking or mobile payments.
* This article has been translated by AI.
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