Bank of Korea Governor Rhee Chang-yong Urges Swift Action from Global Banking Regulators on CBDC Development
During a financial conference in Seoul, Rhee Chang-yong, the Governor of the Bank of Korea (BOK), emphasized the imperative for central banks worldwide to expedite the creation of central bank digital currencies (CBDCs). Rhee underscored the necessity of introducing retail CBDC options to counteract the growing influence of stablecoins, citing the considerable risks they pose to global financial stability due to a lack of clear regulations.
Rhee specifically referenced the high-profile collapses of stablecoins in 2022, notably highlighting the TerraUSD (UST) de-pegging incident that resulted in substantial losses for investors. Concerns about the potential contagion effects of such collapses on mainstream finance prompted central banks to throw their support behind retail CBDCs.
Taking proactive steps, South Korea’s central bank initiated preliminary studies on its CBDC in early 2023, bolstering staff resources to manage upcoming pilot programs. Reports suggest that the Bank of Korea may adopt a phased approach, launching an initial pilot in the cities of Jeju, Busan, and Incheon.
In November, the BOK officially confirmed plans to commence a retail CBDC pilot in 2024, involving 100,000 participants. Technical guidance for the project will be provided by the Bank for International Settlements (BIS), with a memorandum of understanding signed with Italy’s central bank, Banca d’Italia, for collaborative CBDC efforts.
A BOK spokesperson outlined the timeline, stating, “Following consultations with relevant organizations and a review of related laws, the pilot project will be conducted first in the fourth quarter of 2024.” The spokesperson added that the possibility of separate pilots may be considered for new individual projects proposed by banks.
Reports suggest that the BOK’s retail CBDC initiative will prioritize use cases such as cross-border payment functionality, offline capabilities, and programmable payments to counteract the rise of stablecoins.
Governor Rhee’s call aligns with previous statements from European Central Bank executives, advocating for a unified effort to curb stablecoin adoption. Denis Beau, Deputy Governor of the Banque de France, emphasized that central banks should pursue CBDCs with tokenization support to maintain relevance against stablecoin issuers.
Exploring Alternatives to Stablecoins
In addition to CBDCs, financial institutions in South Korea are exploring alternatives to stablecoins, including certificate of deposit (CD) tokens. Woori Bank’s report predicts that CD tokens could replace traditional bank deposits without causing significant economic disruptions, emphasizing their stability from the banks’ perspective. The report also highlights the interoperability of CD tokens with CBDCs as a key factor in their preference for this asset class.