Bank of Korea doesn’t have immediate plans to launch a central bank cryptocurrency
Although the whole world is buzzing about Bitcoin and the CBDC, however, the Bank of Korea has no plans for a central bank digital currency. They argue that direct access to a cryptocurrency could reduce the deposits and reserves of commercial banks.
Bank of Korea Official said no need for a central bank digital currency in developed world | Source: bok.or.kr
Bank of Korea Has No Plans for a Central Bank Cryptocurrency
The Bank of Korea (BOK) says it currently has no immediate plans to launch a digital currency. Moreover, the application of something seems to be quite tricky in Korea, with the main reason being fears of financial stability.
So far, the central bank is taking a wait-and-see approach to issue a government-controlled cryptocurrency, or central bank digital currency (CBDC).
Researchers from South Korea’s central bank published a study earlier this year, modeling how a national cryptocurrency could affect liquidity at commercial banks. Specifically, the BOK said public direct access to such a cryptocurrency could reduce banks’ deposits and reserves, leaving them with a cash shortage.
Instead, policymakers plan to increase research on CBDC release:
“We will closely monitor the process of issuing digital currencies by major central banks and actively participate in relevant discussions with international organizations such as the International Settlement Bank (BIS).”
Careful consideration is needed
The central bank’s thinking about a monopoly digital currency comes after Facebook ignores the secrecy surrounding its active cryptocurrency, or Libra, raising concerns about the impact of cryptocurrencies.
Switzerland, Canada, and Singapore have also begun to explore the use of digital currencies, and their research efforts are underway. However, China seems ready to be the first to launch a government-backed cryptocurrency, with plans to have its currency and operate by the end of next year.
Historically, South Korea has been one of the hottest trading and investment markets for cryptocurrencies. However, the authorities were hesitant to adjust the virtual asset class, as they believed that cryptocurrency regulation could lend legally to the field.
After much deliberation over the years, the country’s parliament has passed a bill that will officially classify cryptocurrencies as digital assets and exchange of cryptocurrencies as regulated financial businesses.
More specifically, this regulatory framework will require cryptocurrency exchanges for reporting and registration with the Korean financial regulator, the Financial Services Commission (FSC). They will also have to comply with strict patron rules (KYC), anti-money laundering (AML) regulations, as well as customer verification policies.
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