South Korea’s central bank is moving ahead with research into digital currencies as it sets up a legal panel to advise on possible regulatory sticking points.
Per an article in The Korea Times on Monday, the Bank of Korea (BOK) said the six-person panel, comprised of legal experts in the financial and IT sectors, as well as one specializing in fintech, would provide guidance and advice to the bank as it develops and tests a central bank digital currency (CBDC).
“We established the advisory group to discuss legal issues surrounding a CBDC and figure out which laws need to be revised or enacted for smooth progress in the BOK’s possible issuance of digital currency,” a BOK official told Korea Times.
This is the next phase in the BOK’s rapid reappraisal of CBDCs. In December, when it set up its task force to look into digital currencies, it said it was more to “keep an eye” on what other countries were doing rather than to create something themselves.
But that changed in April when other countries including Japan and the U.S. began moving faster than originally anticipated. Abandoning its wait-and-see-approach, the BOK jumped into a 22-month pilot program to develop and test a new CBDC that could be used to replace physical cash.
While the BOK is keeping its cards close to its chest, it has dropped a few hints. It appears the proposed CBDC, as it looks like now, would piggyback off the settlement systems they and other central banks use to enable high-value transfers between financial institutions.
Last Friday, Bank of Korea Governor Lee Ju-yeol described it as “noteworthy” that central banks appeared to be developing digital payments systems on top of their real-time gross settlement systems (RTGS) – interbank payment networks – “to reduce settlement risk.”
“Digital transformation could move beyond the private sector to the central bank’s payment and settlement system,” Lee said, in a speech marking the BOK’s 70th anniversary. “As an institution responsible for ensuring the safety and efficiency of the payment and settlement system, the central bank needs to proactively respond to these changes.”
“The currently ongoing research and development on central bank digital currency must be carried out as planned,” he added.
The BOK’s newly convened legal team is believed to have met for the first time on Monday and will continue to do so until May 2021, at least.