Lee Ju-yeol "High Volatility in Bitcoin, etc... Limits as Payment and Store of Value"

"Demand for Cryptocurrencies Will Decrease as a Means of Payment with CBDC Introduction"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] Amid the heated investment enthusiasm for cryptocurrencies such as Bitcoin, Lee Ju-yeol, Governor of the Bank of Korea, stated on the 24th, "I believe cryptocurrencies have limitations in functioning as a means of payment or a store of value."

In a written Q&A session with reporters on the same day regarding major issues, Governor Lee said, "Cryptocurrencies such as Bitcoin have high price volatility." He added, "With the future introduction of Central Bank Digital Currency (CBDC), especially as a means of payment, the demand for cryptocurrencies is expected to decrease."

Earlier, Governor Lee described the recent rise in Bitcoin prices as an "abnormal surge" during the full meeting of the National Assembly's Planning and Finance Committee last month. He evaluated, "From various standards and judgment criteria, the current (Bitcoin) price seems to be an abnormal surge," and "It is difficult to understand why Bitcoin prices are so high." He continued, "Price forecasting is extremely difficult, but it will show very high price volatility going forward," and stated, "Cryptocurrencies have no intrinsic value."

The reactions of central bank heads worldwide toward cryptocurrencies are similar to Governor Lee's. Jerome Powell, Chair of the U.S. Federal Reserve (Fed), said on the 22nd (local time) at a remote panel discussion hosted by the Bank for International Settlements (BIS) on digital banking, "Cryptocurrencies are highly volatile and therefore not a useful store of value," adding, "They are closer to speculative assets that are substitutes for gold rather than the dollar."

Central banks are developing technology with the view that cryptocurrencies as a means of payment will be properly replaced by legal tender CBDCs. The Bank of Korea has also been conducting 'CBDC pilot system' consulting since November last year and plans to test it in a virtual environment in the second half of this year. The system will be checked at each stage, including issuance, distribution, and redemption, along with functions such as fund transfers and payment settlements.

Governor Lee stated, "CBDC research needs to be continuously promoted regardless of immediate introduction, and this research is to prepare for future changes in the payment and settlement environment," adding, "Based on the analysis of this year's test results, we plan to continue follow-up technology development and testing after next year." Regarding the actual issuance of CBDC, he emphasized, "Before issuance, it is necessary to thoroughly check technical requirements and conduct in-depth reviews of the impact on the financial system and others at the time of issuance."

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