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South Korea Still Reticent on National Crypto After Task Force Report

South Korea’s central bank has announced says it has no plans to launch its own central bank digital currency (CBDC), reports Coindesk.

This announcement came after another last month which suggested that South Korea was, in fact, looking at the feasibility of such a move. It had been suggested in May that a task force had been set up in January to examine if a CBDC would adversely affect South Korea’s financial system.

The original statement said that the Bank of Korea (BoK) was looking at similar movements globally by central bank counterparts, this after it had confirmed it was considering using blockchain technology for an ambitious “cash-free” society pilot.

The latest statement claims that it does not plan to launch its own digital currency over fears it could destabilize the economy, with the BoK going as far as to say it could pose a “moral hazard” due to the instability it would cause to financial markets. According to the Korea Times, Bok also issued a statement suggesting that digital currencies do not perform as fiat money.

The latest report goes on to examine alleged elements of risk associated with a CBDC. A BoK Economist said that “our thoughts are that digital currencies have been exposed to various categories of risk associated with credit, liquidity and legal management”, adding that traditional and digital currency operating side by side could create “social costs and undermine social welfare”.

The central bank has further suggested that there is hope for CBDC, but that they would need far more rigorous testing despite their obvious potential to impact on the current banking system.

Press source Yonhap mentions that BoK wants closer scrutiny and regulation on private crypto users regarding the actual size of their holdings so as not “to inflate their collateral and produce more e-money”, adding that a central bank should take full charge of the issue of banknotes and electronic money.

 

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