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Cryptocurrencies

South Korea central bank warns over CBDCs

Friday 8 February 2019 | 12:02 PM CET

South Korea’s central bank has issued a warning over central bank digital currencies (CBDCs) a week after saying it would not introduce one itself.

CBDCs are known as state-backed or government-backed digital currencies. These involve a blockchain-based version of a country’s fiat currency, either replacing or circulating in tandem with paper notes and coins. While a number of governments are currently taking into account the feasibility of using a CBDC, South Korea decided against the measure in late January 2019, as a result of a six-month consultation process from Bank of Korea (BoK).

As per a report of the central bank, a CBDC would result in mass withdrawals of funds from private institutions, squeezing liquidity and pushing up interest rates. However, according to a report from the Bank of International Settlements, in January 2019 around 70% of central banks worldwide started conducting some form of CBDC research.

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