BOK Examines Central Bank-Issued Digital Currency – Report
South Korea`s central bank creates taskforce for CBDC and blockchain.
The Bank of Korea (BOK) has set up a taskforce for analyzing the implications of cryptocurrency and blockchain, including central bank-issued digital currency (CBDC), local media reported on Friday.
“A taskforce has been studying the possibility of issuing a CBDC and how digital currencies will influence the country's overall financial sector since January. We will announce updates on this issue by the end of June,” the bank said in a statement as quoted by the Korean Times.
BOK notes this is only a study of CBDC and the central bank will work with its partners on a global level before any decision whether or not to issue central bank digital currency.
What is CBDC?
CBDC is a term for a digital currency, issued by the central banks. No central bank has issued CBDC yet. Most of the cryptocurrencies like Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) are decentralized and not connected with governments, inter-government organizations or borders unlike fiat money.
Bank of Korea`s Headquarters, Seoul/Image`s source: wikipedia.org
Central bank digital currencies are two types: a wholesale and a general purpose one, according to the Bank for International Settlements (BIS), an international organization that unites 60 central banks.
“The wholesale variant would limit access to a predefined group of users, while the general purpose one would be widely accessible”.
“In part because cash is rapidly disappearing in their jurisdiction, some central banks are analysing a CBDC that could be made widely available to the general public and serve as an alternative safe, robust and convenient payment instrument. In circumstances where the traditional approach to the provision of central bank money – in physical form to the general public and in digital form to banks – was altered by the disappearance of cash, the provision of CBDC could bring substantial benefits,” BIS says in its special central bank digital currency report.’
The Bank of Korea released 12.3% less South Korean Won (KRW) in 2016 compared to 2015 as the population moves to electronic and mobile payment services.
CBDC in Asia-Pacific
Peoples Bank of China (PBoC) Vice-Governor Fan Yifei wrote in an op-ed that if China develops a CBDC, PBoC will retain full control. The possible Chinese central bank digital currency will be very different form the current virtual money and it may or may not use blockahain as main technology:
“A CBDC will also help curb the public's demand for private cryptocurrencies, which will strengthen the role of our sovereign currency,” Yifei was quoted by financial media outlet Yicai in January.
Masayoshi Amamiya, Deputy Governor of Bank of Japan (BoJ), raised his concern about possible effect of CBDC on the traditional financial system, especially the role of private banks:
“The issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks' financial intermediation,” Amamiya said in his closing remarks at IMF-BOJ conference in April.
Note: Cover image`source - Maro Verch, flicker.com under CC BY 2.0.