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Bank of Korea chief remarks that CBDC will lead to devaluation of private cryptos

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  • Central Bank Digital Currencies (CBDC) are cryptocurrencies specific to a given country.
  • Several countries are experimenting with this new technology as the popularity of blockchains and decentralized finance systems are ever-increasing.
  • However, South Korea’s Central Bank governor has remarked that introducing country-specific digital assets would lead to currently popular cryptos’ devaluation.

Some countries are currently experimenting with blockchain technology to enable decentralized finance systems to work alongside their mainstream economies. Countries like China, Russia, Turkey and Jamaica have already established CBDC systems, whereas several more nations are contemplating on creating their native CBDCs. South Korea is one among such countries. The governor of the South Korean Central Bank, Lee Ju-Yeol, in an event, has remarked that such a measure would put in check the currently ballooning prices of cryptos such as Bitcoin and Ether.

CBDC to eliminate potential Bitcoin issues

Lee stated that for a commodity to be used as an ideal store of value or the means of a payment, its volatility should not express extreme oscillations, a phenomenon that Bitcoin and other digital currencies are not new to. Thus, their ability to be viewed as a viable store-off-value would diminish as soon as their markets show significant swings. This hiccup has plagued several virtual currencies in the recent past. However, CBDCs are immune to this issue as central banks control their value.

Lee stated that the inception of CBDCs would sway the public’s opinion towards adopting native tokens, and as a result, other cryptos, particularly Bitcoin, would lose their sheen. His remarks come at the backdrop of South Korea planning to launch its CBDC pilot later this year, focusing primarily on the transfer of funds, payments, and issuance. The Bank of Korea has already undertaken extensive research on a national virtual currency and concluded that such a measure would be optimal for legal tender usage in the country.

Jerome Powel: US Federal Reserve chairman & Lee 

A month ago, US Federal Reserve chairman Jerome Powell had also mentioned that CBDCs need to coexist harmoniously with other forms of payments. Lee acknowledged that a thorough study has to be carried out on the impact of a CBDC on the economy before circulating them. He has also recently remarked that Bitcoins possess no “intrinsic value”, and following in the US’s footsteps would be the right way forward in CBDC’s successful implementation.

However, the success of a CBDC can be gauged only by the popularity it garners after its introduction.

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