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The Bank of Korea is accelerating the introduction of Central Bank Digital Currency (CBDC). As the influence of cryptocurrencies such as bitcoin in the market increased day by day, and there was a sign of shaking the value of the real money that the central bank monopolized, the BOK prepared to issue a CBDC. The prospects are greatly mixed. When CBDC is introduced, there is a view that private cryptocurrencies such as bitcoin can disappear completely, and that the price of bitcoin can jump on the contrary.
According to the BOK on the 24th, BOK plans to build a CBDC pilot system through external consulting by the end of March this year, and conduct a test of CBDC operation in a virtual environment in the second half of this year. In this regard, BOK Governor Lee Ju-yeol said at the general meeting of the Planning and Finance Committee held on the 23rd, “The review in terms of CBDC design and technology is almost finished.”
Like Bitcoin, CBDC utilizes blockchain technology, which is the core of cryptocurrency. However, unlike privately issued Bitcoin, CBDC differs in that it is issued by the central bank and guaranteed by the government. In the case of Bitcoin, the price rises and falls depending on supply and demand, but the difference is that CBDC has a certain value like real paper money.
From the standpoint of each country’s central bank with issuing power, it is inevitable that new currencies such as bitcoin that are offered by the private sector can be seen as a glance. This is because if cryptocurrencies such as bitcoin are widely used, the position of the existing real money will be reduced and the government’s influence on monetary policy will decrease.
This is the reason why central banks in major countries started to introduce CBDC. According to a report released last month by the Bank for International Settlements (BIS), 86% of the 65 central banks in the world surveyed by BIS last year are considering whether to adopt CBDC.
Bitcoin’s market capitalization, which has been rapidly rising recently, has exceeded 1 trillion dollars (about 1100 trillion won). The heads of domestic and foreign economy started to’crush bitcoin’.
In this regard, US Treasury Secretary Janet Yellen said on the 18th, “Bitcoin is a very speculative asset,” and “It is very important to regulate the institutions that handle bitcoin and keep them accountable.”
The same goes for President Lee Ju-yeol. On the 23rd, at a general meeting of the Technical Committee, he devalued, saying, “It is difficult to understand why the price of bitcoin is so expensive.”
However, prospects are mixed as to the impact of the introduction of CBDC on the value of Bitcoin. First, it is expected that Bitcoin will coexist with CBDC as cryptocurrency transactions become more active with the issuance of CBDC. Barry Silvert, CEO of Digital Currency Group, an American blockchain capital firm, said, “The introduction of CBDC will trigger a huge investment in the financial system, and the digital currency of non-central banks such as Bitcoin. It could also be used for “.
On the other hand, there is a prospect that the attractiveness of private cryptocurrencies will be greatly reduced due to CBDC, leading to a decline. Bitcoin pessimist Nouriel Rubini is a professor at New York University. “When CBDC is issued, it will immediately replace non-scalable, inexpensive, and insecure cryptocurrencies,” said Professor Rubini.
There are also observations that the slow adoption of CBDC could be pushed back from the competition with Bitcoin. Australian investment bank Macquarie said, “Now the US financial authorities are exerting a great deal of influence on the cryptocurrency and its ecosystem. As the size of cryptocurrencies increases and the number of people using them increases, the effect of regulations decreases, and the demand for legal currency Will decrease.”