CBDC research service report
New regulations such as issuance due to legal amendment
‘Pilot test’ also runs within the year
“It’s not a virtual currency” line
Willingness of digital currency’currency sovereignty’
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The Bank of Korea concluded that digital currency (CBDC) can also hold the status of legal currency following banknotes and coins. The central bank, the BOK, will provide a digital payment method as a public good and protect the currency sovereignty from private virtual assets and foreign digital currencies. The BOK decided to test the issuance of CBDC this year in a virtual environment and review the revision of related laws and systems such as the BOK Act.
On the 8th, the BOK released the report after internally reviewing the reports of Professor Jeong Soon-seop and Jeong Joon-hyuk of Seoul National University Law School and Lee Jong-hyuk, professor at Hanyang University, who requested a research service on legal issues related to the central bank digital currency and the enactment and amendment of laws. This is the first time that the Bank of Korea has released a report after entering into research on the CBDC system. The researchers said, “CBDC has the status of’legalization’ under the existing monetary legislation, and issuance of CBDC also falls within the scope of the purpose and work of the BOK.” However, the currency issued by the BOK is composed of current Bank of Korea notes (banknotes) and coins (coins), and CBDC does not correspond to this, so it indicated that it is necessary to amend the BOK Act and establish regulations for issuing CBDCs.
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In particular, the researchers clearly distinguished that CBDC has a legal status equal to cash and can be exchanged, but “it is not a virtual asset” such as bitcoin. CBDC is a digital currency for electronic transactions, but as it relies on the central bank’s exclusive issuing power, the issuer is not clear and is different from virtual currency that cannot be exchanged one-to-one for cash.
The issuance and distribution of CBDC is the responsibility of the BOK. As for the CBDC issuance method, exchange for existing cash was first considered, and two options were suggested, in which the BOK issues directly to users or issues them to users with a financial institution such as a bank as an intermediary. At the same time, it analyzed that whether the BOK will distribute CBDC directly or indirectly through financial institutions can have a significant impact on the financial industry and commerce. The researchers also emphasized the need to amend the criminal and civil laws to punish CBDC forgery and to prepare grounds for seizure and acquisition, and added that the current provisions for reserves should be applied to customer deposits held by banks as CBDCs. Based on the results of this research service, the BOK decided to preemptively review the legal and institutional reforms related to CBDC, and conduct a’pilot test (mock test)’ for CBDC introduction within this year in a virtual environment.
/ Reporter Son Chul [email protected], Reporter Jo Ji Won [email protected]
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