The Bank of Korea has once again put cold water on the idea of adopting a central bank digital currency (CBDC), according to remarks by a central bank official.
According to a Wednesday report from CoinDesk Korea and notes of a conference on payments that took place on Tuesday in Seoul, Hong Kyung-sik, director of financial regulations at the central bank, said argues that "in Korea, as in most advanced economies, need a CBDC."
"In Korea, we already have a payment and settlement infrastructure. In addition, the degree of openness is also high internationally, "Hong said, according to conference notes posted on the central bank's website.
The money can be transferred quickly, cheaply and safely in the country with the help of application-based solutions and bank transfer, and purchases can be settled efficiently with credit cards, Hong added. The open bank is also being developed in Korea, with APIs allowing seamless connections to and between financial institutions.
"The possibility that the CBDC issue will soon become a reality in major countries remains weak," said Hong.
That being said, the head of the central bank admitted that a CBDC could make sense in developed countries to achieve some very specific goals, such as the systems put in place in Scandinavia in order to avoid monopolization and to preserve the resilience of the infrastructure involved.
On the other hand, developing countries with insufficient infrastructure could find a CBDC useful to improve the inclusion and reduce costs associated with cash processing, he said. For China, a digital currency of the central bank could support monetary policy and help promote the internationalization of the renminbi, Hong said.
He added that the central bank would continue to examine blockchain technologies and monitor CBDC developments globally, but added that the institution would be cautious in adopting new solutions.
"The Bank of Korea should promote and support innovation in payment and settlement. Every effort must be made to strike a balance between efficiency and security, "he concluded.
The Bank of Korea has long been skeptical of the CBDCs and has already been concerned about the evolution of these currencies. In a paper released by the bank in February, it was suggested that a CBDC could oust commercial banks and dump them of their funds, destabilizing the banking system.
Bank of Korea image via Shutterstock