Digital Assets: South Korea’s Rethink on its CBDC Strategy

February 3, 2020 | Digital Assets, News

South Korea’s volte-face may have something to do with China’s moves.

South Korea is scrambling to make up for the lost time in the global moves towards central bank developed digital currencies. It now intends to constitute a new research team for the very same purpose, according to cryptonews.

Last year, it demobilized a research task force it had constituted for digital and cryptocurrencies. The ostensible reason given at the time was that South Korea had no intention of issuing a central bank digital currency (CBDC): “There is no plan to issue a CBDC in the near future because CBDC is no incentive to respond to the reduction of cash use or to increase financial inclusion.” (translated)

What seems to be the cause of the rethink by the central Bank of Korea on CBDC?

The central bank of South Korea: December backtrack

In December, the Bank of Korea surprised observers by saying: “We are considering issuing digital currency (CBDC).”

The current action to set up a research team seems to be a fallout of that policy reversal.

But again, it appears to be hastening slowly towards its own CBDC. It is tempering its stand with a somewhat ambivalent accompanying statement: “Just because we have launched a research team, it wouldn’t be correct to assume that a CBDC is about to be issued. We will be more interested in studying how other countries are pushing ahead with CBDCs.”

The ‘other country’ well might be China, whose rigorous moves towards a CBDC may have unnerved South Korea. According to one analyst, “The People’s Bank of China’s aggressive bid to break ‘dollar dominance’ by using its own digital currency is thought to have led to the BOK’s change of heart.”

China’s CBDC and USA’s too

Indeed, a world-beating digital yuan may be taking shape.

The Chinese central bank has completed top-level design, formulation, functional research, and testing of the digital yuan. It would very soon proceed towards pilot projects to test the Chinese CBDC.

In the US, J Christopher Giancarlo, former Chair of the Commodity Futures Trading Commission (CFTC), along with Charles Giancarlo and Daniel Gorfine, has joined hands with Accenture on the digital dollar, or US CBDC project.

The nonprofit Digital Dollar Foundation engaged Accenture as the lead architect and technology innovation partner for the project. Accenture is working with Sweden’s Riksbank to develop an e-krona CBDC as a pilot project.

The Bank of Russia, too may be evaluating a CBDC. This was revealed by the central bank’s chairperson Elvira Nabiullina last month: “Now such an opportunity is being actively discussed by many countries, we are also at the stage of studying this topic,” she said. “First of all, we need to understand what will be the advantages for our citizens, for business, for example.”

It is not surprising, therefore, that South Korea’s central bank is getting back on the CBDC bandwagon.

Related Story:  Digital Assets: South Korea Backtracks on its Central Bank Digital Currency

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