Forex and Crypto News

Bank of Korea refused to launch cryptocurrency CBDC

12:24 08 February /2019

The Central Bank of South Korea - the Bank of Korea - issued a document stating that potential state crypto coins (СBDC) may have negative sides. The regulator said this a week after it was said that it was abandoning the idea of ​​launching CBDC. The meaning of CBDC is to organize the release of cryptocurrencies that will work on the blockchain, as a result of which their emission process will be publicly controlled. Thus, the audit of the central bank’s activities would be organized.

CBDC can coexist with fiat money and metal coins, or they can eventually completely replace them, and the issue of their release is currently being actively discussed at the level of the central banks of the world. For South Korea, the decision to abandon the potential launch of the CBDC was made on the basis of a six-month study of this problem by Bank of Korea employees in consultation with government officials.

As a result, it was understood that the launch of СBDC creates the risk that they will receive funds from large private equity funds, which will lead to a reduction in liquidity in the stock market. This, in turn, can cause a collapse of the Seoul exchange indices, as well as force the Bank of Korea to raise interest rates in order to make more attractive deposits in fiat money in South Korean banks.

Raising rates will be an even bigger blow for the stock market and will knock it down, causing a margin call on a number of obligations secured by stocks and bonds of South Korean corporations. The depreciating securities will force lenders to demand early repayment by the debtors of their obligations. Based on the fact that the Bank of Korea intends to prevent the implementation of such a scenario, the regulator made the final decision to refuse to launch CBDC.

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