- South Korea’s central bank governor has urged action on CBDC.
- The governor stated that stablecoins are becoming popular in the country.
- According to the governor, stablecoins may threaten the system’s stability.
Digital money is a fast-rising trend in South Korea, and the country’s central bank can’t afford to take charge of the imminent financial revolution. A keen area that the central bank aims to spread its tentacles on is CBDC issuance and usage.
According to Central Bank Governor Rhee Chang-yong, “CBDC is a research project that can no longer be postponed from the central bank’s perspective.”
Central Bank Governor Calls for Action on CBDCs
While speaking at the 2023 MOEF-BOK-FSC-IMF International Conference on Digital Money event held in Seoul on December 14 and 15, the governor urged local authorities to take action on CBDCs, especially now that stablecoins have begun to be issued.
Notably, Chang-yong expressed concerns that stablecoins might become widespread as a digital payment method to the detriment of the “system’s stability.”
“If stablecoins become established as a digital payment method and crowd – it is questionable whether the system will operate stably,” Chang-yong stressed. “Their widespread adoption could diminish the role of central bank money and impair the effectiveness of monetary policies.”Chang-yong’s sentiments come after the Bank of Korea (BOK), in partnership with the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), recently unveiled a comprehensive plan to test the feasibility of CBDC use cases in retail and wholesale settlements.
Banking in 2024
According to the plan, the pilot program will enlist 100,000 citizens to test CBDC use in payments in 2024, after which the central bank will examine the “feasibility and effectiveness of issuing and distributing these new forms of financial products.”
For South Korea, introducing CBDCs into local payment chains isn’t only about rivaling stablecoins, which Bloomberg estimates are “by far the largest” trading pairs for other cryptocurrencies in the country.
The central bank believes CBDC will address various challenges in the traditional finance system, including high transaction fees, slow settlement processes, and concerns over fraudulent claims in government-issued voucher systems.
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