Last fall, the Bank of Korea announced that it would test the central bank’s digital currency distribution in 2021. It appears that preparations will continue on several fronts, and today the bank will release a new book addressing the legal issues surrounding the potential issuance. From this coin.
According to a summary in the Korean media, the book requires a review of laws to ensure CBDC will work in the future. Specifically, the Bank of Korea used blockchain technology to process transactions as part of a 22-month pilot CBDC program that began in April 2020 and will end in December of this year. Testing the currency distribution in 2021 represents the third phase of this project after focusing on technological development and initial operational analysis in the first and second phases.
The recently published book confirms this timeline and scope, and states that “The Bank of Korea is reviewing operational procedures for the deployment of digital central bank currencies as well as external consultations. This year, we will be testing the CBDC in a virtual environment and conducting tests to validate its functionality and safety. In addition, the bank announces it. About the motivation behind the project and the potential benefits of the future digital currency:
“Converting cash into digital currency can increase GDP by up to 3 percent. Digital currency will speed up the circulation of funds and reduce maintenance costs. It will also be an effective way to implement negative interest rates, which will generally enhance government money management.”
The potential benefit of central bank digital currencies in supporting negative interest rate policies was recognized by other central bank officials, including the deputy governor of Japan, over the past year. While these guidelines have already been adopted in Japan since 2016 and in Europe since 2014, other central bankers have left the doors open for a similar move in the uncertain recovery of the COVID-19 economy, most recently the Bank of England.
Besides this aspect, an unnamed analyst reported by Korean media pointed to the accelerated adoption of the digital yuan in China and suggested that its potential impact on the international monetary system is a factor in Korean research and development this year:
The US dollar may be the standard currency for cash, but China is looking to make the digital yuan the new dominant medium. South Korea must develop strategies for how the country is positioned in the new monetary era. ”
The expert also stressed the need to study any potential negative consequences of the Convention on Biological Diversity, such as the exacerbation of existing economic inequality due to digital information gaps.