When the Bank of Korea introduces central bank digital currency (CBDC), it is necessary to amend the law so that it is not interpreted as a general virtual asset under the specific financial information law.
On the 8th, the Bank of Korea released a report on’CBDC-related legal issues and directions for enactment and amendment of laws’ on the 8th.
This report contains the results of external research services conducted to review various legal issues that may arise when CBDC is introduced. Research includes Professor Jeong Soon-seop, Seoul National University, Lee Jong-hyuk, Hanyang University, Seoul National University Professor Jeong Jun-hyuk participated.
The report pointed out that the first principle that the Bank of Korea should consider when issuing a CBDC is that “as a legal currency, it should have the same status as the current banknotes and coins in the issuance and compulsory power of currency”
According to the report, for this purpose, it is necessary to set the basis for the issuance of CBDC in the Bank of Korea Act, and to comply with the regulations that apply to the banking notes and coins of Korea.
The report also made it clear that “under the current law, various virtual assets issued by institutions other than the Bank of Korea cannot be considered CBDC regardless of their name.”
In addition, “CBDC is not a virtual asset,” saying, “Because there is not only a clear issuer called the Bank of Korea, but also based on the exclusive issuing power of the Bank of Korea, there is no issuer or ordinary virtual assets that are not based on the central bank’s exclusive issuing power. It cannot be seen the same as that.”
The report also suggested that CBDC is not a virtual asset, but it may be interpreted as a virtual asset under the Certain Financial Information Act revised last year, so it is necessary to clarify that it is excluded from the law.
Article 2, No. 3 of the Special Money Act broadly defines virtual assets as electronic certificates that can be traded or transferred electronically as having economic value, regardless of the existence of the issuer. Accordingly, it can be interpreted that the CBDC issued by the Bank of Korea is also included in the concept of virtual assets under the Specific Financial Information Act.
The report goes ““It would be desirable to add CBDC to one of the clues to Article 2, No. 2, or add CBDC to the Presidential Decree in accordance with the proviso to Article 2, No. 3,” he explained.
In addition, he said, “It is important to design the CBDC system so that the civil and criminal enforcement systems are applied to the CBDC without disruption,” as a principle to be reviewed when issuing the CBDC.
“To ensure that CBDC is successfully circulated as a legal currency in the market and not used for illegal financial purposes Regarding the transfer of CBDC, it must be clearly stipulated in laws, and seizure, enforcement, and confiscation must be possible.”
The report also said, “To ensure that the digitally vulnerable are not excluded from the CBDC issuance process. A careful approach is necessary,” he suggested.
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“CBDC has a positive effect in that it allows people who do not have a bank account or credit card to use related services, but users who are vulnerable to the digital environment cannot use the payment method and, accordingly, can be excluded from economic activities.” “There is a need to consider ensuring the right to use cash or allowing a real-based token-type CBDC within a limited range, such as when necessary in everyday life or in an emergency situation,” he explained.
Meanwhile, the Bank of Korea has been conducting CBDC research since last year to respond to changes in the future payment environment, which may increase the need to introduce CBDC. Currently, we are conducting the’CBDC Pilot System Consulting’ project, which designs the business process and system structure necessary for CBDC construction, and based on this, we plan to actually implement and test a system that works in a’cloud virtual environment’ this year.