Samsung has announced that it has signed a memorandum of understanding with the central bank with the aim of conducting technical research on digital currency. The consumer electronics conglomerate Samsung is exploring the possibility of introducing a central bank digital currency in collaboration with the Bank of Korea.
Samsung has stated that a Central Bank Digital Currency (CBDC), a digital currency issued by a central bank, could function “offline” and be transferred among owners using their Galaxy smartphones and smartwatches, thanks to a secure chip embedded in the devices.
According to Samsung, payments could be made between devices using Near Field Communication (NFC) technology, which is integrated into smartphones for contactless payments.
Samsung has mentioned that it developed a solution last year that utilizes NFC technology for Central Bank Digital Currencies (CBDCs). This way, users can make payments even without an internet connection.
In a press statement released on Monday, Samsung stated that it would “continue research on how to minimize security risks associated with offline payments and support reliable transactions in emergency situations without network connections” in collaboration with the Bank of Korea.
“We are pleased to be the first central bank to develop offline CBDC technology in collaboration with Samsung Electronics,” said Seungheon Lee, Deputy Governor of the Bank of Korea, in the press statement.
“With the establishment of this memorandum of understanding, we hope that the Republic of Korea will continue to lead in the field of offline CBDC technology, which is actively being explored by global central banks,” he added.
China has already created a digital version of the Chinese yuan and is testing its CBDC in several cities, while the United States is also carefully considering whether to introduce a digital version of the dollar and how it would function.
The practical aspects of issuing CBDCs have been questioned by some commentators, considering how convenient it is to make transfers using existing methods such as online banking, mobile money transfer apps, and cryptocurrencies.
Various privately developed digital currencies also enable people to make near-instantaneous payments. However, most tokens, such as Bitcoin, are highly volatile.
Stablecoins have been identified as a potential solution to this issue, although governments have concerns about tokens issued by private companies.
Nonetheless, clear limitations remain for businesses regarding instant settlement of transactions. The way the banking system is set up means that payments from customers to merchants often take several days to process.
This is a pain point that both private companies and governments hope to address using new technologies, including blockchain and digital currencies.
Source: CNBC.com