Bank of Korea Accelerating CBDC Introduction

The Bank of Korea set the legal foundation for central bank digital currency (CBDC) introduction and specified the type of issuance, transfer methodology and interest payment process. The central bank is going to initiate a pilot test for CBDC introduction within this year based on its commissioned research showing that CBDC can be regarded as a legal tender and the scope of business of the Bank of Korea as the sole currency issuer can include CBDC issuance.

According to the research result, additional provisions related to issuance and so on are necessary for CBDC, which is intangible, to be included in the scope of currency. In addition, the Act on Reporting and Using Specified Financial Transaction Information, in which the current definition of virtual assets is broad, needs to be revised so that CBDC and the assets are clearly distinguished from each other.

The Bank of Korea explained that exchange between a user’s cash and CBDC can be considered as a CBDC issuance method, the method can be divided into direct issuance from the Bank of Korea to the user and issuance through an intermediary such as a financial institution, and the intermediary may be an electronic financial business operator such as a fintech firm as well as the institution.