The Bank of Italy and the Bank of Korea recently formalized their cooperation through a Memorandum of Understanding (MOU) signed on December 5, 2023. This partnership marks a pivotal moment in the exploration and potential implementation of digital currencies by central banks, adding to growing global interest in the digitization of national currencies.
The core of this MOU is mutual knowledge sharing, with a particular focus on information and communication technology (ICT) that supports real-time payment systems and CBDC. This is not the first cooperation project between the two banks. Previously, the two organizations had made joint efforts by collaborating with the Monetary Authority of Singapore and the International Monetary Fund on a paper discussing Purpose Bound Money (PBM). An innovative concept in the digital currency realm, PBM allows you to allocate your money to specific uses and ensure that it is utilized to meet predetermined goals.
In parallel, the Bank of Korea has been actively participating in the CBDC space, taking notable steps such as announcing wholesale CBDC trials in collaboration with the Bank of International Settlements last October. The goal of this initiative is to evaluate the feasibility of using wholesale CBDC as a settlement asset for tokenized bank deposits. The pilot program is designed to explore different CBDC design models and does not necessarily mean that full-scale implementation is imminent in Korea.
On the Italian side, the Bank of Italy has been actively investigating the potential impact of CBDCs on the economy. In a paper published last July, the bank examined the impact of CBDCs on residents’ choices in small, open economies, focusing specifically on banking systems and economic activity. The research forms part of Italy’s wider initiative to help financial institutions understand and experiment with tokenized assets, including partnerships with organizations such as Polygon Labs and Fireblocks.
In conclusion, the MOU between the Italian and Korean central banks is more than a bilateral agreement. This reflects the global shift towards a digitalized financial future. As these countries and others delve deeper into the world of digital currencies, the financial landscape is poised for significant change.
Image source: Shutterstock