Samsung said it would press ahead with central bank digital currency (CBDC) technology in South Korea.
The South Korean tech giant is planning on launching a CBDC currency in collaboration with the Bank of Korea (BOK).
CBDCs are central bank-issued and controlled digital currencies that can be exchanged using blockchain or distributed ledger technology.
Central banks around the world have been actively promoting the use of CBDCs to replace hard cash, as paper currency use has steadily declined as the popularity of cryptocurrencies and credit card use becomes more prevalent.
The company announced on May 16 its memorandum of understanding agreement with South Korea’s central bank to research and create a secure offline CBDC transaction system for its Galaxy smartphone devices.
Samsung said that CBDCs could be sent between Galaxy smartphone and smartwatch owners, via near-field communication (NFC) technology, using a security chip built into their devices to enable contactless payments.
The security chip technology is able to offer strong protection against physical or side-channel attacks, said the company.
Samsung and Bank of Korea Collaborate
The tech firm said that it would work with the Bank of Korea, to “continue researching how to minimize security risks associated with offline payments, to support reliable transactions in emergency situations even without network connections.”
Samsung added that it had successfully developed a system using NFC technology for CBDCs last year, which allowed users to make a payment without an internet connection.
“Our offline CBDC technology jointly developed with Samsung Electronics is the world’s first of its kind developed by a central bank,” said Lee Seung-heon, BOK’s senior deputy governor, in a press release.
“We are very pleased to be the first central bank to develop offline CBDC technology in partnership with Samsung Electronics,” said Lee.
“Through the establishment of this MOU, we hope that the Republic of Korea will continue to lead the way in the field of offline CBDC technology, a sector that is being actively explored by global central banks,” he added.
Samsung Executive Vice President of Mobile Experience Won-Joon Choi added: “This collaboration with Bank of Korea has allowed us to apply Samsung’s advanced security innovations to the digital currency field.”
“We expect our collaboration to make a valuable contribution to the advancement of global offline CBDC technology.”
Digital Currency Race Heats Up Worldwide
The world’s two largest economies, China and the United States, are in a race to develop CBDCs to enable consumers to send money instantaneously.
It can often take days for payments from merchants’ customers to actually go through.
China has already created a digital Chinese yuan and is testing out its new CBDC in numerous cities.
The Federal Reserve is closely looking into whether to release a digital version of the dollar, but said an act of Congress would be required to allow it to do so.
Some experts say that most consumers are satisfied for now with the current money transfer systems for online banking, money transfers, and cryptocurrency transactions.
Existing digital currencies already allow people to make near-instant payments, but most crypto tokens like Bitcoin are highly volatile.
Stablecoins, which are attached to central bank currencies, are seen as a potential solution to this, but most governments of any currency are issued by private companies.
Digital currency is becoming popular among government authorities, as it makes it easier to track money laundering and terrorism financing by making it simpler to collect transaction data.
However, many critics say that the state could use it to violate the privacy of its citizens or penalize them for their political views.