Bank of Korea publishes book on central bank digital currency’s legal issues

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Final fall, the Financial institution of Korea announced it might be testing the distribution of a central financial institution digital foreign money in 2021. Preparations look like going forward on a number of fronts, with the financial institution’s publication of a brand new e book at this time devoted to the authorized questions raised by the potential issuance of such a foreign money.

In response to a abstract in Korean media, the e book requires revisions to the legislation to make sure that a future CBDC may efficiently function. The Financial institution of Korea has notably been using blockchain expertise to handle the transactions in its 22-month lengthy CBDC pilot program, which commenced again in April 2020 and can wrap up in December of this 12 months. Testing the foreign money’s distribution in 2021 represents the third part of this undertaking, following a concentrate on technological growth and preliminary operational analyses in phases one and two. 

The newly-published e book confirms this timeline and scope, outlining that “the Financial institution of Korea is conducting an evaluation of operational procedures for a CBDC rollout, and out of doors consulting can also be underway. This 12 months, we will launch a CBDC pilot system in a digital surroundings, and run checks to confirm its features and security.” As well as, the financial institution states the motivations behind the undertaking and potential advantages of a future digital foreign money: 

”Transformation from money to digital foreign money may elevate GDP by as a lot as 3 p.c. Digitalization of foreign money would speed up foreign money circulation and cut back upkeep prices. It might even be an environment friendly option to understand unfavorable rates of interest, general enhancing the federal government’s financial administration.“

The possible usefulness of a CBDC for sustaining negative interest rate policies has been acknowledged by different central financial institution representatives, together with the deputy governor of Japan, previously 12 months. Whereas these insurance policies have certainly been adopted in Japan since 2016, and in Europe since 2014, different central bankers have left the door open to the same transfer amid the unsure restoration of their COVID-19 economies, most just lately the Bank of England.

Alongside this facet, an unnamed analyst cited by Korean media has pointed to China’s accelerated rollout of a digital yuan and prompt that its potential affect on the worldwide financial system is a consider Korea’s personal analysis and growth efforts this 12 months:

“The U.S. greenback could also be the usual foreign money for money, however China is aiming to make digital yuan the brand new dominant medium. South Korea must develop methods on what place the nation will take within the new financial period.”

The professional additional highlighted the necessity to examine any probably unfavorable penalties of CBDCs, resembling their amplification of present financial inequalities because of “gaps in digital info.”