Disclosing the results of external research services related to CBDC
CBDC issuance includes the purpose and scope of work
Consider issuance of CBDC through intermediaries such as fintech
Interpretation that the amount of money can be adjusted through interest payment
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The research results revealed that the central bank digital currency (CBDC), which the Bank of Korea is researching, has the same legal character as the existing currency. Not only was the legal basis for the BOK to introduce CBDC, but also the form of issuance, transfer method, and interest payment issues were detailed. However, the BOK has not decided whether to actually introduce CBDC, and is in a position that it is continuously conducting experiments in a virtual environment.
On the 8th, the BOK announced the results of an external research service last year on the subject of legal issues related to CDBC and the direction of enactment and amendment of laws. The research was conducted by Professor Jeong Soon-seop of Seoul National University, Professor Jeong Jun-hyuk of Seoul National University, and Professor Lee Jong-hyuk of Hanyang University. The research report revealed the legal nature of the CBDC, and at the same time checked the BOK’s authority to issue CBDC and whether the CBDC system could be operated.
The researchers viewed the CBDC as a legal currency because it can meet the central bank’s monopoly of issuance and compulsory power as a legal currency under the existing monetary legislation. Legal currency refers to a currency that is legally recognized for its compulsory prevailing power, meaning that everyone must accept the currency and can use it in all transactions.
It is judged that issuing CBDC, an electronic currency, is within the scope of the BOK’s purpose and business as the BOK holds exclusively the right to issue currency. However, to include CBDC, which is not fluids such as banknotes (banknotes) and coins (coins), in the currency, it is expected that separate regulations on the basis of issuance will be required.
As for the CBDC issuance method, it is possible to consider an exchange type that converts the cash held by users into CBDC. At this time, two methods were discussed: the’direct type’ issued by the BOK directly to users and the’mixed type’ that is issued through intermediaries such as financial institutions. It was suggested that the hybrid type could be considered as adding electronic financial companies such as fintech companies in addition to financial institutions.
The report also mentioned interest rate issues. As interest is paid on the premise of financial use, such as deposit contracts, the interpretation that the interest paid to CBDC is, strictly speaking, close to a’change of currency volume’. The BOK believes that it will be able to control the amount of money by paying positive (+) or negative (-) interest to the CBDC after deliberation and resolution by the Financial Monetary Commission.
In addition, it was analyzed that the provisions of the Civil Code should be prepared to prepare principles on judicial issues such as the acquisition and seizure of CBDC, and the enactment and amendment of the criminal law is necessary to punish forgery and alteration. In addition, the interpretation that anti-money laundering regulations for cash may be applied to the CBDC, and that the BOK should comply with the’Personal Information Protection Act’ when performing CBDC-related tasks.
A BOK official said, “We are carrying out pilot system construction and testing in a virtual environment related to central bank digital currency as planned this year.” “We plan to preemptively review plans for improvement of related laws and systems.”
/ Reporter Jo Ji-won [email protected]
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