Bank of Korea: "Cash is the Most Trusted Payment Method in Emergencies... Discussions on Digital Currency Continue"

[Asia Economy Reporter Eunbyeol Kim] The Bank of Korea stated on the 25th that cash is the most reliable means of payment in emergencies and that cash circulation should continue in preparation for emergency situations.

In the '2019 Payment and Settlement Report' released by the Bank of Korea on the same day, it pointed out, "Although there are forecasts that a 'cashless society' will arrive soon, there is also a need for a certain level of cash to continue circulating."

The Bank of Korea explained that payment methods such as credit cards may become unusable or delayed during emergencies such as natural disasters, large-scale power outages or fires, and computer system failures.

In fact, last April, wildfires in the Gangwon and Yeongdong regions caused base stations and internet lines to burn down, making it difficult to use automated teller machines (ATMs) in some areas.

The Bank of Korea said, "Cash is the most reliable means of payment in emergencies," and added, "It is necessary to continuously circulate a certain level of cash in preparation for situations where credit card use becomes difficult." It also added, "The Bank of Korea will continue policy efforts to ensure that consumers do not experience inconvenience when using payment methods such as cash, and that no marginalized groups arise due to payment method innovations."

Meanwhile, the Bank of Korea announced that it will strengthen its response as discussions on central bank digital currencies (CBDC) are actively taking place in major countries around the world.

Last month, the Bank of Korea established a dedicated digital currency organization, which will focus on planning policy tasks and researching laws, systems, and technologies. The Bank of Korea stated, "We plan to establish a cooperative system with related departments within the Bank of Korea (monetary policy, financial stability, international finance, issuance), carefully monitor the CBDC issuance progress of major central banks, and actively participate in discussions such as those at the Bank for International Settlements (BIS)."

Looking at the CBDC responses by major countries, Sweden's central bank, Riksbank, has been piloting the digital currency 'e-krona' since last month. Riksbank plans to experiment with the use of e-krona for the next year to study how central bank digital currencies will be used by the public.

The People's Bank of China has also established a dedicated CBDC organization and is preparing to issue digital currency. France will start the 'Digital Euro Project' in the first quarter of this year. The Bahamas, composed of 700 islands, is expected to introduce its own digital currency nationwide to overcome poor payment infrastructure. However, the U.S. Federal Reserve (Fed) has stated that it has no plans to issue digital currency, citing a lack of strong incentives to do so.

The Bank of Korea also announced plans to improve the Bank of Korea financial network system to a structure where remitting and receiving institutions directly transfer and receive funds.

Currently, Korea's payment system operates such that when a transaction occurs, financial institutions first pay the recipient, and on the next business day, they receive funds from other financial institutions through the central bank's current account.

This content was produced with the assistance of AI translation services.