Seminar on Amendments to the Bank of Korea Act... "Payment and Settlement Should Be Included in the Purpose Clause of the Bank of Korea Act" Also Argued

Webinar Hosted by Rep. Kim Ju-young of the Democratic Party
'Directions for Revising the Bank of Korea Act to Enhance the Safety of Payment Systems'

[Asia Economy Reporter Kim Eunbyeol] As the power struggle between the Bank of Korea and the Financial Services Commission continues over the payment and settlement management authority of big tech companies such as Naver and KakaoPay, there is a claim that payment and settlement should be included in the Bank of Korea Act's purpose clause.

On the 16th, Professor Ko Dongwon of Sungkyunkwan University School of Law stated at the 'Direction for Amending the Bank of Korea Act to Enhance the Safety of the Payment and Settlement System (Focusing on Payment and Settlement and CBDC Discussions)' webinar hosted by the office of Kim Jooyoung, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, that "If the promotion of stability and efficiency of the payment and settlement system is added to the purpose clause of the Bank of Korea Act, it can clearly establish that one of the main objectives of the Bank of Korea is to promote the stability and efficiency of the payment and settlement system."

He also emphasized the need to place the legal basis for the types of payment and settlement systems and the designation requirements for operating institutions in the Bank of Korea Act, clarifying the scope of the Bank of Korea's supervisory duties. He suggested that it is desirable to have designation requirements in the Bank of Korea Act and for the Monetary Policy Committee to designate based on these requirements. He also pointed out the need to stipulate payment risk management in the Bank of Korea Act and to establish the right to request data submission from financial institutions and IT companies.

Professor Ko opposed the management of big tech companies through the amendment to the Electronic Financial Transactions Act being promoted by the National Assembly's Political Affairs Committee. He argued that the amendment to the Electronic Financial Transactions Act, which allows the Financial Services Commission to license the Korea Financial Telecommunications and Clearings Institute (KFTC) as an 'electronic payment transaction clearing business' and grants the Financial Services Commission regulatory approval authority, inspection, supervision, and sanction powers over KFTC, conflicts with the Bank of Korea's payment and settlement duties.

He stated, "Payment and settlement operations of fintech companies, etc., should be cleared and settled through the small-value payment system operated by KFTC and the Bank of Korea's financial network, so there is no need to mandate separate external clearing." He suggested that it is better to promote mandatory reporting of suspicious illegal fund transactions. Although the Financial Services Commission argued that the payment transaction clearing business system is necessary to prevent the proliferation of unqualified and foreign clearing operators, he also refuted this. Professor Ko said, "Since the Bank of Korea guarantees final settlement through the Bank of Korea financial network, the possibility of indiscriminate establishment of small-value payment system operators is low," adding, "Especially if it is restructured into a Real-Time Gross Settlement (RTGS) system, the need to establish small-value payment system operators in the future should be considered almost nonexistent."

At the seminar, Professor Ko presented, followed by discussions among legal experts, academia, and Bank of Korea officials. The session was chaired by Professor Ahn Suhyun of Hankuk University of Foreign Studies Law School, with participants including Professor Kim Hongbeom of Gyeongsang National University Department of Economics, Professor Park Sooyong of Sogang University Department of Computer Science, Professor Park Kiyoung of Yonsei University Department of Economics, lawyer Kang Hyunggu of Law Firm Gwangjang, and Min Jungyu, Director of the Bank of Korea's Legal and Regulatory Affairs Office.

Professor Kim Hongbeom of Gyeongsang National University said, "The International Monetary Fund (IMF) diagnosed in 2014 that while the Financial Services Commission has sufficient regulatory and supervisory authority over the payment and settlement system, the Bank of Korea's supervisory authority is ineffective, and recommended amending the Bank of Korea Act." He added, "Considering this, policy cooperation and coordination among policy authorities are necessary." Professor Park Kiyoung of Yonsei University also said, "The Financial Services Commission's digital finance innovation plan is appropriate in terms of direction and timeliness," but added, "The 'electronic' in the electronic payment transaction clearing business does not change the essence of the payment and settlement system, and since stability is important, it is desirable for the Bank of Korea, which has the role of the ultimate lender, to be responsible."

The seminar also discussed the inclusion of CBDC-related provisions in the Bank of Korea Act. Professor Ko argued that considering the possibility of issuing CBDC, it is necessary to reflect legal provisions in the Bank of Korea Act for ▲ issuance of electronic form Bank of Korea notes ▲ transactions with the private sector regarding CBDC ▲ delegation of CBDC account management ▲ payment of interest or imposition of negative interest rates on CBDC. Lawyer Kang Hyunggu of Law Firm Gwangjang said, "When introducing CBDC, it is necessary to reflect in the Bank of Korea Act not only the issuance basis but also the legal grounds for legal tender status, transactions with the private sector, interest payments, and outsourcing of operations." Professor Kim Hongbeom noted that since the Bank of Korea has stated that there is not a great need to issue CBDC in the near future, it is necessary to prepare by observing overseas cases but to carefully consider the timing of amending the Bank of Korea Act.

So far, there are two amendment bills to the Bank of Korea Act that explicitly state that payment and settlement operations are the Bank of Korea's exclusive authority: one sponsored by Representative Kim Jooyoung and another by Representative Yang Kyungsook. Since there are conflicting parts between the Bank of Korea Act amendment bills from the Planning and Finance Committee members and the Electronic Financial Transactions Act amendment bill from the Political Affairs Committee, a clash between the two committees over these bills is inevitable.

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