The central bank of South Korea will create a task force to research the issuance of a central bank digital currency in 2020. This was revealed in a document titled Monetary Policy for 2020. In the document, the bank said that it would continue building on its existing research in the blockchain, CBDCs, and cryptocurrencies. Besides that, it will continue to oversee the enhancement of the security of payments and settlements networks.
Recruiting Experts in the Digital currency Sector
As part of the research into a CBDC, the central bank of South Korea is going to recruit experts in the cryptocurrency field. A report in a local media outlet revealed that the bank had put out job ads for digital currency experts.
Besides organizing the task force, the bank says that it is actively engaging the Bank of International Settlements and other organizations to stay updated on the developments surrounding CBDCs. In the document, the central bank says that it will use Principles for Financial Market Infrastructures (PFMI) developed by the BIS as a template to improve its payments and settlement infrastructure. The PFMI framework establishes a method for managing risks such as liquidity, credit, settlement, and custody risks across payment systems, trade repositories, and other infrastructure.
The Bank Has Looked into the Issuance of Retail CBDC in the Past
Recently the bank has looked into the possibility of issuing a central bank digital currency. However, a report released in January 2019 concluded that there was no need to issue a CBDC for now. Most of the research into a central bank digital currency has been focused on a retail and wholesale digital currency.
The Bank of International Settlements has in the past warned about the issuance of a retail central bank digital currency. According to it, such a digital currency could be used to facilitate bank runs, thereby destabilizing the commercial banks deposit funding. Instead, it is requesting that banks focus on wholesale digital currencies.
France, which is one of the largest economies in the world, plans to pilot a wholesale central bank digital currency in 2020. The bank’s governor revealed this a few weeks ago. Depending on how it pans out, the nation could deploy it throughout the economy. This could lead to the increased speed of settlements, while also reducing the risk and cost.
CBDC Could Become the Norm in future
No nation has issued a CBDC yet. However, many central banks are researching a CBDC. It is likely that from 2020, CBDCs will become the norm. This could force banks that had no plans to issue a CBDC… to work on their own. Banks have already shown declining profit margins the last few years as FinTechs have evolved. Banks will continue to do everything in their power to maintain market share. Major financial institutions such as the World Bank might also start using digital currencies. There have even been calls to have the global reserve currency changed to a digital currency to replace the USD.
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