The Bank of Korea is set to announce details of an ongoing study into cryptocurrencies next month that includes a plan exploring the possibility of issuing a central bank digital currency (CBDC).
The central bank revealed:
A taskforce has been studying the possibility of issuing a CBDC and how digital currencies will influence the country’s overall financial sector since January. We will announce updates on this issue by the end of June.
The monetary authority stressed it is currently ‘premature’ to elaborate on whether it would issue a central bank digital currency presently while insisting that it is keeping an eye on other endeavors by counterparts globally.
Notably, the revelation follows a recent announcement by the BOK wherein the central bank confirmed it is considering blockchain use cases and cryptocurrencies for its ‘cash-free’ society pilot. According to a local report, the bank has already begun exploring potential uses of blockchain technology in joint-research with other central banks to apply the decentralized technology for payment rails.
South Korea is among the world’s largest trading markets for cryptocurrencies and has proven to be a hotbed for blockchain applications in a number of areas including shipping, registering a community vote for an entire province, retail insurance payments in Seoul and more.
In April, Seoul city mayor Park Won-soon revealed that the Korean capital could soon turn to ‘S-Coin’, a cryptocurrency that could be used to fund public welfare programs and be used for other city-wide initiatives.
The pivot toward digital currencies and a ‘cashless’ society comes at a time when the central bank is issuing fewer quantities of physical cash. According to the central bank’s own figures from 2016, the authority released 12.3 percent fewer 10,000 won (approx. $9.2) bank notes from the year before as Korean society is moving away from cash to electronic and mobile payments.
Moving to a cashless society could also cut costs up to 1.1 percent of Korea’s GDP, according to analyst Kwak Hyun-soo at Shinhan Investment Corp, who also sees a cashless society stamp out tax-avoiding underground economies.
“It can open the underground economy, and thus enhance equivalence in taxation. The shoebox full of 50,000 won banknotes that you see in movies will disappear in reality (with the advancement of a cashless society),” the analyst said, highlighting the benefits that a cashless society brings to a country’s monetary policy.
Korea’s foray into exploring a central bank digital currency joins a growing list of countries including China, Singapore, Sweden, Japan and a number of others actively researching central bank-issued digital currencies.
At least one of those efforts is predicted to go live this year according to Antony Lewis, director of research, cash and CBDC strategy at global banking blockchain consortium lead R3.
Bank of Korea image from Shutterstock.
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