In December of last year, Unchain CEO Lee Hong-gyu, who oversees the development of Naver’s’LINE’ blockchain platform technology, said at the’Upbit Developer Conference (UDC) 2020′ event, “Corona 19 with the rise of Facebook’s digital currency Libra and China’s CDBC. With the proliferation, the introduction of CBDC will be faster.”
CBDC refers to the central bank currency issued in electronic form separate from reserve deposits and settlement deposits. As it is implemented in an electronic manner, unlike cash, it is not only possible to limit the anonymity of related transactions, but also to pay interest, set the holding limit, and adjust the usage time according to the policy purpose.
CEO Lee said, “It will take 10 years for most countries to introduce CBDC until last year, but the time to introduce it will be faster due to China’s pilot project, Corona 19, etc.” Because of the 19, the need to take out cash this year is decreasing.” He explained that the necessity to actually transfer the national finances to the people, such as emergency disaster subsidies, is also a factor that reinforces this trend.
“For this reason, many countries have changed their position on CBDC this year. Financially advanced countries that affect the global economy have begun to seriously consider CBDC,” he said. It will be used in parallel with currency,” he predicted.
Recently, the Bank of Korea analyzed that the introduction of CBDC could prevent tax avoidance caused by cash use. In a report entitled’The Impact of CBDC on Social Welfare in a Tax Avoidable Economy’, the BOK revealed that the introduction of a CBDC that pays interest improves resource allocation, unlike a cash-only economy.
Paying interest to CBDC increases the use of CBDC and increases the consumption of transactions that tax authorities can monitor. At the same time, consumption of tax avoidance transactions through cash is reduced, and the distortion of resource allocation is corrected, thereby increasing social welfare. It is explained that the introduction of CBDC can have a positive effect in an economy where tax avoidance transactions using cash are serious.
The BOK side plans to build a pilot system for issuance of CBDC and conduct tests during this year. Prior to this, the plan is to preemptively review measures to improve related laws and systems.
Accordingly, the BOK published a report on’CBDC-related legal issues and directions for enactment and amendment’ and pointed out that it is necessary to revise the specific financial information law (the special law) in order to distinguish CBDC from cryptocurrencies such as Bitcoin.
The report explained that the CBDC can be viewed as having the status as a legal currency as long as it can meet all the requirements as a legal currency. CBDC is only a difference in the means of denomination of currency, it has the same status as cash, issuance is monopolized by the central bank, and has compulsory power.
Therefore, the report concludes that CBDC is different from general virtual assets. The report pointed out that “it cannot be viewed the same as ordinary virtual assets that do not have an issuer or are not based on the central bank’s exclusive issuing power.”
However, the report pointed out that there is a need to revise the related laws so that the CBDC is not included in the virtual assets because the current special special law defines virtual assets widely. The Special Law stipulates that virtual assets are’electronic certificates that can be traded or transferred electronically as being of economic value’, and CBDC issued by the BOK may also be included.
In addition, the report stated that the BOK needs to prepare a separate basis for issuing a CBDC. The CBDC issuance itself meets the purpose and scope of the BOK’s business, but the current BOK law stipulates only fluids such as banknotes and coins as issued currency. Therefore, it is pointed out that it is necessary to establish a new regulation on the basis of issuance of CBDC, not in the form of such fluids.
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