Banks of Italy, Korea will share CBDC knowledge under new memorandum
Both central banks are exploring the impact a CBDC could have on an economy
Bank of Italy Governor Fabio Panetta | Frank Rumpenhorst/"Fabio Panetta, Future of Payments in Europe" (CC license)
The Bank of Italy and the Bank of Korea signed a Memorandum of Understanding on Tuesday.
The MOU will allow for the two central banks to share “knowledge and information on the topics of ICT technologies in support of real time settlement systems and the central bank digital currency (CBDC),” according to a press release from the Bank of Italy.
This isn’t the first time that the two have collaborated with each other on CBDCs. Back in June, both the banks of Korea and Italy partnered with the Monetary Authority of Singapore and the International Monetary Fund on a paper focused on purpose-bound money. PBM allows money to be programmed to be used for a specific purpose.
The central banks sought to ensure that PBM wouldn’t come “at the expense of digital money’s ability to serve as a medium of exchange.”
Read more: Singapore plots ‘live’ wholesale CBDC pilot for next year
The Bank of Korea announced in October that it would test a wholesale CBDC in partnership with the Bank of International Settlements. The goal, the Bank of Korea said at the time, is to see if wholesale CBDCs are suitable to be used as a settlement asset for tokenized bank deposits.
“This test is expected to lay the foundation for implementing a variety of innovative payment and financial services that are differentiated from existing services by presenting a pilot model of future currency infrastructure that reflects the development of IT technology,” a translated version of the press release said.
The pilot program does not signify that Korea plans to implement a CBDC, however. The purpose is just to explore CBDC design models to find one that’s possibly suitable, the Bank of Korea added.
Korea wrapped its first phase of a CBDC research simulation project back in January 2022.
The Bank of Italy published a paper back in July focusing on the impacts that a CBDC could have on “choices of residents in a small open economy.”
It sought to “analyze the consequences on the banking system and on economic activity of an increase in the preference for the foreign CBDC, to the detriment of that for domestic currency and deposits.”
The central bank also launched an initiative to help financial institutions explore tokenized assets, tapping Polygon Labs and Fireblocks back in July. The project will help institutions experiment with security tokens through transactions using DeFi in a regulated environment.
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