BOK "Promoting CBDC Pilot Test... Consensus Formed That Bitcoin Is Not Currency"

"Virtual Assets Are Not Currency, Consensus Among Central Banks Worldwide"
"Not Currency, So Bank of Korea Excluded from 10-Ministry Consultative Body"

On the morning of the 28th, the 2020 Payment and Settlement Report publication briefing was held at the Bank of Korea in Jung-gu, Seoul. From the left in the photo: Kim Cheol, Head of the Payment Stability Team; Hong Cheol, Head of the Payment Policy Team; Bae Jun-seok, Deputy Governor; Lee Jong-ryeol, Director of the Financial Settlement Bureau; Yoon Seong-gwan, Head of the Digital Currency Research Team.

[Asia Economy Reporter Eunbyeol Kim] The Bank of Korea announced that it plans to conduct a pilot experiment for Central Bank Digital Currency (CBDC) within this year. Having completed research on CBDC, implementation technologies, and business process analysis, the purpose now is to verify system performance through experiments in a virtual, limited environment. The Bank of Korea also clearly stated its position that Bitcoin and similar assets cannot be considered 'currency.'

On the 28th, Bae Joon-seok, Deputy Governor of the Bank of Korea, said at the "2020 Payment Report Briefing," "Based on the results of CBDC consulting, we plan to conduct a pilot experiment within 2021," adding, "Through the pilot system to be built in a virtual environment, we plan to test service functions such as remittance and payment along with processing tasks for each stage of the CBDC lifecycle, including manufacturing, issuance, distribution, redemption, and destruction."

According to the schedule table titled 'CBDC Research Promotion Stages' included in the report, the Bank of Korea received consulting related to the CBDC pilot experiment in March, completed business process design, system architecture design, and established an implementation plan. From June to January next year, it plans to build the CBDC pilot system and conduct virtual environment testing.

Additionally, the Bank of Korea stated that it will also check whether ledger management technology based on distributed ledger technology, security technologies for personal information protection, and prevention of data tampering can be applied to the CBDC system. The Bank plans to participate in CBDC discussions with major central banks and international organizations to share research outcomes.

However, the Bank emphasized that this pilot experiment is only to verify the CBDC business process and is not premised on issuing CBDC. Yoon Sung-kwan, head of the Bank of Korea’s Digital Currency Research Team, said, "We cannot definitively state the timing of CBDC commercialization at this point."

Regarding virtual assets (cryptocurrencies), which have recently become a hot issue, the Bank of Korea stated that there is a consensus that they are not currency. Lee Jong-ryeol, Director of the Bank’s Financial Settlement Bureau, said at the briefing, "Not only the Bank of Korea but most countries and governments share the view that Bitcoin is not currency," adding, "It is natural that the Bank was not invited to the 10-ministry consultative body led by the Office for Government Policy Coordination because it is not considered currency."

In response to criticism that Korean authorities are delaying defining virtual assets, the director said, "The Financial Action Task Force (FATF) has defined 'virtual assets,' and accordingly, our Act on Reporting and Using Specified Financial Transaction Information (the Special Financial Transactions Act) also defines and uses the term virtual assets for now," adding, "If the Bank of Korea is deemed necessary to participate during discussions in the National Assembly or elsewhere, we will fully participate and provide opinions."

The Bank of Korea also stated that risks such as consumer protection concerns related to stablecoins have not been completely resolved. The director said, "Regulation, monitoring, and supervision are necessary."

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