The Bank of Korea will test the central bank-issued digital currency (CBDC) next year. South Korea is aiming to catch up with neighboring China in its digital currency journey.

According to The Korea Herald, the South Korean central bank completed the technical development phase of the national digital currency and is preparing for a new stage of testing, distribution, and circulation of coins. After neighboring China reported the successful testing of the digital yuan, in the spring of 2020, South Korea decided to accelerate work on its national digital currency project. The Bank of Korea announced in April that it had launched a 22-month pilot program that would run through December 2021.

Unlike China, where the digital yuan was tested in partnership between the Chinese People's Bank and other financial institutions, the Central Bank of South Korea will test its CBDC in a virtual environment.

According to the Korea Times, BoK will simulate transactions on a decentralised platform that will be similar to transactions for cash or traditional payments.

"The CBDC will be issued and circulated in the virtual world and we are going to test a number of transaction scenarios under a variety of circumstances," an official said.