2018-6-23 06:52 |
In a report released today by the Korean Times, The Bank of Korea (BOK), the country’s central bank, issued a statement saying that they oppose the idea of issuing a central bank digital currency (CBDC). According to the report, the BOK is worried over concerns that a sudden launch of a CBDC could cause serious damage to the Korean economy and even become a moral hazard—causing social costs and undermining social welfare. Kwon Oh-ik, a researcher at BOK’s economic research institute says 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. Digital Currencies don’t perform as money”
This report has been released following the BOK creating a special task force in January of this year, which has been studying digital currencies and their potential effects on Korea’s financial sector. There has been talk that Korea has been considering issuing its own CBDC since 2016, and many thought as recently as last month that a BOK-issued CBDC was likely to happen. However, the BOK had made it clear since the onset of its task force that it was too soon to tell if a BOK backed CBDC was viable, as cryptocurrencies are “uncharted waters” for federal governments.
In the report released today, the BOK also expressed equal concern over digital currencies being issued in the private sector. Like most countries, Korea’s central bank is the only entity capable of issuing currency and therefore has complete control over the total amount of money in circulation. The BOK is responsible for maintaining financial stability in the country, protecting Korean currency from inflation and ensuring that Korean currency isn’t used for criminal activity.
According to a headline today in the Yonhap News, the BOK fears that allowing a free market competitive currency issuing system without oversight from authorities will strongly motivate private electronic money issuers to inflate their collateral and produce more electronic money than they have.
“It is desirable for the central bank to monopolize the power to issue banknotes. Also, it is necessary to regulate the issuing of money by private players, even if the private sector are allowed to create electronic money.”
While a CBDC not being launched in Korea might come as a disappointment to some, it should in no way be surprising. Introducing a state backed cryptocurrency is a risky economic experiment unlikely to be conducted by a stable first world country. Cryptocurrency adoption on a global scale will need to be project undertaken by ordinary citizens. It will be the market which drives the demand for cryptocurrency over fiat, and with cryptocurrency still in its early stages of development, we are likely a long time away from fiat currency ceasing to be the foundation of the global economy.
The post Central Bank of Korea: “Digital Currencies Don’t Perform as Money” appeared first on UNHASHED.
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