The Bank of Korea (BOK), South Korea’s central bank has declared that it does not plan to issue a central bank digital currency (CBDC) in the near future, according to local news reports.
CBDCs are a hot topic among central banks as several studies are being carried to weigh its benefits against the risks which may be associated with them. At the moment, Central banks seem to be divided on the subject.
The Great Debate about CBDCs
In October last year, technology giants and enterprise blockchain solution provider IBM conducted a study involving 21 central banks. As Smartereum reported, the study results showed that more than half of the participating banks agreed banks should issue their own digital currencies and 38 percent said they were already exploring the development of CBDC. A more recent study by Bank for International Settlements (BIS) involving 60 central banks found that 70 percent of them were researching CBDCs.
A major benefit of CBDC is that it will provide more efficient cross-border payment systems to replace the existing systems. Speaking of the old system, Michelle Bullock, Reserve Bank of Australia noted they were “slow, costly and involving significant compliance burden and a number of different financial institutions in different jurisdictions.”
But, IBM’s study was a mixed bag. 76 percent of participants were uncertain that blockchain and distributed ledger technology (DLT) is a necessary step to take. Blockchain basically removes the need for trusted third parties but the central banks themselves are considered sufficiently trustworthy already. Craig Ramsey, a senior executive at HSBC added that blockchain deployments may pose a great challenge to existing real-time gross settlement (RTGS) systems.
Bank of Korea (BOK) Joins the Nay Party
According to reports in Korean Herald, the BOK said there is no immediate need to introduce a CBDC citing a study into the prospects of a domestic CBDC issuance. According to an anonymous source within the bank, the bank examined the social and legal aspects to come to its conclusion.
“We have no plans to issue any type of CBDC that is available for all people in the near future. We have to work further on the benefits and costs of CBDC implementation first,” the BOK source was quoted as saying. He added that the bank elected to work further on benefits and costs of CBDC implementation first.
BOK is among a growing number of Central banks that have jettisoned the idea of a national cryptocurrency in the near future. As Smartereum reported, Israel’s Central Bank in similar fashion disapproved plans for a national cryptocurrency after a yearlong study.” The team does not recommend that the Bank of Israel issue digital currency in the near future,” the bank report stated. The bank explained that although the “digital shekel” can help support payment systems in the country with more efficiency, it said that there is currently no uniform specification for central bank digital currencies and risk of issuance is not yet clear. Other central banks including the U.S. Federal Reserve have also denied possibilities of issuing a CBDC soon.