On Monday, the Bank of Korea [BOK] said that it has no plans of issuing Central Bank Digital Currency [CBDC] fearing ‘moral hazard to society’. The BOK is the central bank of the Republic of Korea, and is the sole authority that can issue the South Korean won. CBDC differs from digital currencies (cryptocurrencies), which are not issued by the state and whose ‘printing’ is not in government control.
Kwon Oh-ik, a researcher at the bank’s economic research institute, said in the report:
“We reviewed the possible feasibility of digital currencies as currency; however, our thoughts are that digital currencies have been exposed to various categories of risk associated with credit, liquidity and legal management.”
The BOK believes that CBDCs will radically change the financial system. They feel it will need to be tested thoroughly before going live. Private players will have no role in the rights for money issuance, the report also said. Kwon says in the report:
“Technology improvements don’t mean private sectors will be allowed to have the rights for money issuance. If this happens, the BOK should regulate them but properly.”
The BOK set up a task force in January to study the possibility of issuing a CBDC and how digital currencies will influence Korea’s overall financial sector.
The positive benefits of CBDC include, but are not limited to, protecting money as a public utility and enable an alternative mode of payment to physical cash; financial safety in the practice of fractional reserve banking, and ensuring the safety of payment methods.
But the launch of CBDC also leads to concern about the possibility of ‘bank runs’, which is when many bank account holders try to withdraw their money from the bank.
The report reads:
“It’s desirable that the BOK is the only entity to entirely control issuing money.”
Twitterati Sanjoy Saha(I don’t need your giveaway), reacts to the news:
“in other way they are not confident how to print as much as they want with this new technology “
“I think we’re in the anger phase of adoption”
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