The Bank of Korea (BOK) said Wednesday that it will join an international project to explore how tokenized commercial bank deposits and tokenized wholesale central bank money can be used to improve the current financial system, especially for cross-border payments.

The BOK said under the project, dubbed Project Agora, the Bank for International Settlements, seven central banks, including the Bank of France, Bank of Japan, Swiss National Bank, Bank of England and the Federal Reserve Bank of New York, will work in partnership with private financial firms convened by the Institute of International Finance.

Under the project, they will explore how tokenization of wholesale central bank money and commercial bank deposits can improve the monetary system, with a focus on how to increase the speed and integrity of international payments, while lowering costs, according to the BOK.

The project will seek to overcome several structural inefficiencies in cross-border payments, such as different legal, regulatory and
technical requirements, operating hours and time zones.

The project participants will explore a new common payment infrastructure that could make the system work more efficiently together on a digital core financial infrastructure, according to the BOK.

Since August 2021, the BOK has been carrying out a mock test of a central bank digital currency for inter-financial institution transactions.

Late last year, the central bank, the Financial Services Commission and the Financial Supervisory Service said they would expand the feasibility test to the realm of transfers and settlements among financial institutions based on a token by the end of this year.

Source: Yonhap News Agency