The Central Bank of South Korea (BoK) announced that it plans to launch its own digital currency (CBDC) because of fears that such a move could destabilize the economy.
The BoK said that the release of the CBDC can provide “moral hazard”, adversely affecting the monetary policy. In addition, the regulator noted, it could destabilize the market order, because digital currency is not currently working as money.
“We looked at the likely possibility of using digital currencies as a currency, however, we believe that digital currency is exposed to various risks related to credit, liquidity and legal Department,” said Kwon Oh-IK (Kwon Oh-ik), a representative of the research Institute of the Central Bank of Korea.
BOK also have no plans to allow private sector players to issue currency, because the Central Bank must have “appropriate control” over the financial conditions of the lenders and consumers.
“It is desirable that BoK was the only entity that controls the issuance of money”, — reads the statement of the Central Bank.
The regulator does not reject categorically the possibility of launching CBDC, recognizing that they can “revolutionize” the banking system. However, they should be thoroughly tested prior to their release, said BoK.
“Improvement of the technology does not mean that the private sector will be allowed to have the right to issue money. If this happens, the BoK needs to regulate them, but right,” added Kwon.
The Central Bank of Korea is studying the possibility of using the CBDC and how cryptocurrencies could affect the financial sector since January, when it created a task force to study technology. In may, the regulator has promised to publish new information on this topic by the end of June.
Recall that the possibility of launching CBDC, including based on blockchain technology, is being studied by the Central Banks of several countries, including China, Norway, Thailand, Iran. However, risks associated with the production of CBDC, warned, for example, the specialists of “Central Bank of Central Banks” (BIS) and one of the leaders of the Swiss National Bank. It is noteworthy that the government intends to examine the opportunities and risks of the release of the state of cryptocurrency — e-franc.