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Bank of Korea: Central Bank Cryptocurrencies Pose 'Moral Hazard'

South Korea’s central bank has announced that it does not plan to launch its own digital currency over fears it could destabilize the economy.

According to The Korea Times on Monday, the BoK said that issuing a central bank digital currency (CBDC) could pose a “moral hazard” by adversely affecting monetary policy and its implementation, and possibly causing instability in the market as it effectively doesn’t function like fiat money.

More than that, the Bank of Korea (BoK) went as far as to say that “digital currencies do not perform as money,” in a new report.

While the central bank set out to examine the feasibility of using digital currencies as currency, “our thoughts are that digital currencies have been exposed to various categories of risk associated with credit, liquidity and legal management,” said Kwon Oh-ik, a BoK economist, in the report.

Looking more widely, the unrestricted issuance of both traditional and digital currencies could bring “social costs and undermine social welfare,” the paper warns, adding:

“It’s desirable that the BoK is the only entity to entirely control the issuing of money.”

The central bank isn’t entirely negative on CBDCs, however, saying that they could “revolutionize” the banking system. Even so, they would need to be rigorously tested before being approved.

The paper also recommends the regulation of private issuance of digital currencies, according to Yonhap, adding that the government should impose a tax on issuers to make them less likely to exaggerate the value of their holdings.

“Technology improvements don’t mean private sectors will be allowed to have the rights for money issuance. If this happens, the BoK should regulate them but properly,” Kwon said.

The central bank has been studying the possibility of a CBDC and how cryptocurrencies might influence the financial sector since January, when it set up a task-force to research the technology.

Korean won image via Shutterstock

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Survey: Younger Koreans More Likely to Invest in Crypto

Nearly a quarter of South Koreans in their twenties want to invest in cryptocurrencies, according to a new poll conducted by Bank of Korea.

Yonhap News reported Tuesday that the bank’s survey examined cryptocurrency awareness among 2,511 Korean residents, with the age of the respondents ranging from people in their twenties to their seventies.

Notably, the survey found that roughly 30% of people in their twenties and 40% of those in their thirties are familiar with cryptocurrencies, while only 21.6% of the overall group was aware of the tech.

Perhaps unsurprisingly, the numbers were not as high among the older generations: only the older generations, 5.7% of people in their sixties and 2.2% of people in their seventies had any knowledge of cryptocurrencies.

Younger survey participants also displayed a greater appetite for investing in cryptocurrencies. Some 24.2% of those in their twenties said they were “eager to invest in cryptocurrencies,” according to Yonhap, compared to 20.1% for those in the thirties age-group.

Yonhap noted that an estimated 2 million people currently own cryptocurrencies in South Korea, or about 4% of the country’s roughly 52 million residents, which is perhaps reflective of the fast-growing market for trading there.

And while Korean officials have reportedly raided three different exchanges as part of a larger embezzlement probe – signaling that regulators have no plans to stop policing the space – other firms are entering the market to capitalize on the interest.

The company behind Kakao Talk, the country’s most popular messaging app, confirmed this week that it is launching a blockchain-focused subsidiary. At the same, it rejected rumors that it is preparing to launch a cryptocurrency and associated token sale.

Crypto tokens image via Shutterstock

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Korea's Central Bank Forms Task Force to Study Cryptocurrency Impact

The Bank of Korea (BoK), South Korea’s central bank, has launched a cryptocurrency task force to explore the technology’s effects on the financial system.

According to a report by local news agency Pulse News, the bank said that the task force will see participation from eight departments, including the financial stability and monetary policy units, to study on the impacts of digital currency.

The new group will be administered and assisted by BoK’s payment and settlement department and will be headed by Shin Ho-soon, deputy governor of central bank, the report adds. BoK is also seeking to explore a central bank-backed digital currency as part of the project.

The announcement follows concerns raised in South Korea that the drastic growth in cryptocurrency prices could effect the traditional financial system.

Earlier this week, six unnamed banks in South Korea were scrutinized the Korean Financial Intelligence Unit and the Financial Supervisory Service for their relationship with the country’s bitcoin exchange ecosystem. The regulators indicated at the time that they were looking into whether the banks are complying with their anti-money laundering (AML) obligations when transacting with cryptocurrency exchanges.

The government already said last month that it would move to apply more scrutiny amid growing trade volume at the exchanges, including a possible ban on anonymous trading. Earlier today, new reports suggested that the government of South Korea is intensifying its moves against the country’s bitcoin exchanges.

Bank of Korea image via Shutterstock

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