Shin Hyun-song, presidential candidate of the Central Bank of South Korea, announced that the central bank digital currency (CBDC) and deposit tokens issued by banks should be at the center of the country’s digital currency system. Shin’s approach specifically envisages stablecoins taking on a complementary and secondary role in the system.
New priorities in digital currency strategy
Shin Hyun-song, an economics professor, was recently appointed governor of the Bank of Korea (BOK) and submitted a written opinion to parliament during the approval process. Shin stated that CBDC and bank deposit tokens can work together with stablecoins in a competitive but complementary manner.
This reshaped vision indicates a significant change in decisions regarding the foundations of digital money in the country. Shin emphasized that stablecoins can be useful in areas such as programmable payments and tokenized asset trading, but should not directly replace state-backed money.
“I think central bank digital currencies and deposit tokens can exist complementary and competitive with stablecoins.”
First regulated stablecoin on the market
KRW1, the first fully regulated stablecoin in the country, was launched in February in partnership with BDACS and Woori Bank. While this step supported banks to take a leading role in this field, it created the expectation that it would also raise trust and transparency standards throughout the sector.
Shin stated that he supports a won-backed stablecoin model, but he is of the opinion that the trust factor should be the basic condition of such stablecoins. He emphasized not only the technology but also the reputation behind the currency.
Regulation, security and controversies
In the Central Bank’s approach, special importance is given to the issuance of stablecoins by banks and in compliance with existing regulations. Shin emphasized that obligations such as anti-money laundering and customer verification can be more easily met through banks that already meet these requirements.
Approaching the claims that blockchain-based assets will increase efficiency in foreign exchange transactions with caution, Shin pointed out the regulatory uncertainties and extra costs in this field.
He pointed out that, in general terms, cryptocurrencies lack the criteria of being a unit of account, medium of exchange and store of value in terms of economic functions.
Bank of Korea has also warned in the past that digital tokens issued by private companies or organizations may pose risks to monetary policy and financial stability. For this reason, the need for strict surveillance and control was expressed.
There continues to be debate among policymakers on how much the digital currency market should be opened. While regulatory authorities are highlighting a bank-centered model, some lawmakers are bringing forward draft laws that pave the way for organizations other than banks to issue stablecoins.
