Bank Of Korea Will Not Issue Central Bank Digital Currencybr>
The Bank of Korea (BOK), the central bank of South Korea, said that issuing a central bank digital currency (CBDC) could pose a “moral hazard.”
According to The Korea Times, the central bank said a CBDC will raise the basic mechanics of monetary policy and implementation, including the bank’s use of open market operations. A sudden launch of a CBDC could bring social costs and undermine social welfare. CBDCs could also destabilize the market order because cryptocurrencies currently do not perform as money.
Kwon Oh-ik, a researcher at the bank’s economic research institute, said that while the BOK set out to review the feasibility of using cryptocurrencies as currency, their thoughts are that digital currencies have been too exposed to various categories of risk associated with credit, liquidity, and legal management.
The central bank said that it 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.
“It’s desirable that the BOK is the only entity to entirely control issuing money,” Kwon said. “Also, it is necessary to regulate the issuing of money by private players, even if the private sector are allowed to create electronic money.”
Kwon indicated that CBDCs may “revolutionize” the banking system, but they need to be rigorously tested before being approved.
The BOK said that it has been studying the possibility of a CBDC and how cryptocurrencies might influence the financial sector since January of this year. Its focus has been to protect the best interests of consumers, seek greater financial stability and prevent digital currencies from being used in criminal activities.