The Bank of Korea has said central bank digital currencies are not virtual assets, but an alternative form of fiat currency, requiring some legal changes ahead of any future national rollout.
The comments come with the publication of research conducted by the bank in 2020, examining the plethora of legal issues presented by issuing fiat currency on the blockchain.
According to their findings, CBDCs share the legal status of fiat currency, and can therefore be exchanged freely, held by banks and used in the same ways as any other cash deposit, local news outlets reported.
Notably, the research suggested that because CBDCs are not property assets, they would not currently be subject to laws protecting against crimes like theft and embezzlement.
The report noted that adopting digital currency could come with a significant GDP boost, as well as making the monetary system in Korea more efficient.
”Transformation from cash to digital currency could raise GDP by as much as 3 percent. Digitalization of currency would accelerate currency circulation and reduce maintenance costs. It would also be an efficient way to realize negative interest rates, overall enhancing the government’s monetary management.”
The findings will help frame Korea’s strategy around central bank digital currency, at a time when other countries in the region and the wider world are progressing with their own plans at pace.
Pointing to the progress made on CBDCs in China, the research suggested Korea would need its own strategies to counteract China’s push for global reserve currency dominance with its upcoming digital yuan.
“The U.S. dollar may be the standard currency for cash, but China is aiming to make digital yuan the new dominant medium. South Korea needs to develop strategies on what position the country will take in the new monetary era.”