The Bank of Korea (BOK) plans to announce its recommendations regarding cryptocurrencies including a plan to possibly issue a central bank digital currency (CBDC).
“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 bank said in a statement Wednesday.
The BoK has been studying a move towards a cashless society since 2016 and made 2020 its goal for being cash free. In 2017 the bank began a trial that allowed customers to deposit change from transactions with specific pay systems located in mini-marts and department stores to smart cards that would hold that balance.
The statement noted that the CBDC study is still in its “early stages” because of complex elements in its implications.
The BOK said it was premature to talk on whether it would issue the CBDC, but the central bank will keep an eye on any global developments. There are worries that a digital currency could destabilize traditional lenders if offered suddenly and widely.
It remains to be seen whether the BOK’s confirmed interest in “digital currencies” will help the local cryptocurrency market recover from earlier losses caused by the government’s tough regulations on crypto-trading.
“The critical factor that magnifies the way a market moves is sentiment. This is most important as a market could be pushed ahead by sentiment. The BOK’s interest in digital currencies isn’t that new, and is good in terms of market sentiment,” said a senior economist at the Samsung Economic Research Institute.
Only customers who pass identification checking procedures are allowed to buy and sell cryptocurrencies on platforms operated by major local banks. But financial regulators were given a “free pass” to check and monitor transactions by investors in order to prevent illegal activity. The number of daily transactions in Korea, once regarded as the most active market in cryptocurrency trading, plummeted after the government applied these rules.
Korean startups have been leaving the country in order to raise money on ICO friendlier shores such as Hong Kong, Singapore, and Switzerland.
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