A man walks past an advertisement for Samsung’s Galaxy Z Flip4 smartphone at the company’s Seocho building in Seoul, Jan. 31, 2023.
Jeong Yeon-jee | AFP | Getty Images
consumer technology giant Samsung A central bank digital currency is being considered in partnership with the Bank of Korea.
The South Korean electronics company said on Monday it has signed a memorandum of understanding with the country’s central bank to conduct technical research on digital currencies.
Samsung says the CBDC, which refers to central bank-issued digital currency, works “offline” and can be sent between owners of its Galaxy smartphones and smartwatches, thanks to a security chip in the devices.
Samsung said payments can be made between devices by using near-field communication technology, which is built into smartphones to enable contactless payments.
Samsung said it developed a solution last year to apply NFC technology to a CBDC. This allows users to make payments even without an internet connection, the company added.
In a press release on Monday, Samsung said that together with the Bank of Korea, the company will “continue to study how to minimize the security risks associated with offline payments to support reliable transactions in emergency situations, even without a network connection. “
“We are pleased to be the first central bank to partner with Samsung Electronics to develop off-chain CBDC technology,” Bank of Korea Senior Vice Governor Seungheon Lee said in a release.
He added: “By establishing this MoU, we hope that the Republic of Korea will continue to lead the field of offline CBDC technology that central banks around the world are actively exploring.”
Won-Joon Choi, Samsung’s executive vice president of mobile experience, said: “The partnership with the Bank of Korea allows us to apply Samsung’s advanced security innovations to the digital currency space.”
He added: “We hope that our cooperation can make a valuable contribution to the advancement of offline CBDC technology around the world.”
Countries from China to the United States are advancing research and trials of so-called CBDCs, hoping to make it easier for consumers to send money instantly.
China has created a digital version of the yuan and is trialing its CBDC in a number of cities, while the US is also closely studying whether to launch a digital version of the U.S. dollar and how that would work.
Some commentators have questioned the practicality of issuing a CBDC because of how easy it is to transfer money using currently available methods such as online banking and remittance apps and cryptocurrencies.
Currently, various privately developed digital currencies also allow people to make near-instant payments.But the vast majority of tokens like bitcoin very unstable. Stablecoins have been touted as a possible solution — although governments are wary of tokens issued by private companies.
Still, there is a clear headache for businesses when it comes to instant transaction settlement. The way the banking system is set up means that payments from merchant customers often take days to actually settle.
This is a pain point that private businesses and governments hope to address with new technologies, including blockchain and digital currencies.