| The Bank of Korea Governor Lee Ju-yeol responds to a question after the country's central bank left its benchmark key rate unchanged at 1.5 percent from its monetary policy meeting May 24. Yonhap |
By Kim Yoo-chul
The Bank of Korea (BOK), the country's central bank, said Monday it opposes the idea of central bank digital currency (CBDC) as issuing CBDC will raise the basic mechanics of monetary policy and implementation, including the bank's use of open market operations.
The bank is worrying over concerns that such a sudden launch of the CBDC will cost society a lot and cause a moral hazard. Also, issuing CBDC could destabilize the market order because digital currencies don't currently constitute money.
“It's desirable that the BOK is the only entity to entirely control issuing money,” according to 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,” Kwon Oh-ik, a researcher at the bank's economic research institute, said in the report. “Digital currencies don't perform as money.”
The BOK said the bank doesn't have plans to let private sector players issue currencies as the central bank should have “appropriate control” over financial conditions of lenders and consumers.
BOK's focus has been protecting the best interests of consumers, seeking greater financial stability and preventing digital currencies from possibly being used as a measure of crime.
CBDCs may “revolutionize” the banking financial system but before going live they need to be thoroughly tested through multiple trials. “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,” said Kwon in the report.
The release of the report is the BOK's response about digital tokens after its task force, which has been operational since January this year, has been studying the possibility of issuing a CBDC and how digital currencies will influence Korea's overall financial sector.