Kookgeum Center "CBDC Commercialization Possibility... Helicopter Money Becomes Easier"

Status of CBDC Adoption Initiatives and Related Issues in Major Countries
86% of 65 Countries Already Advancing CBDC Projects

[Asia Economy Reporter Eunbyeol Kim] There is an increasing assessment that the likelihood of Central Bank Digital Currency (CBDC) commercialization has grown as cash usage rates are expected to decline sharply in the future. If CBDC is introduced, it is anticipated that the government could easily implement a 'helicopter money' policy, directly depositing CBDC to individuals during the resurgence of infectious diseases like COVID-19. However, due to significant challenges related to technology and institutional compatibility, large-scale commercialization is not expected to occur in the short term.

According to the report "Status of CBDC Adoption and Related Issues in Major Countries" by the International Finance Center on the 29th, a survey conducted last year by the Bank for International Settlements (BIS) targeting 65 countries showed that 86% are actively pursuing CBDC-related projects, indicating vigorous research activity.

The number of countries responding that they are in the feasibility verification stage of CBDC increased from 42% in 2019 to 60% last year. Countries in the development and pilot stages also rose from 10% to 14%, showing an expansion in CBDC-related research. The Bank of Korea will also begin simulated experiments of CBDC in a virtual environment starting in August.

Senior Researcher Shinsulwi and Expert Choi Seongrak from the International Finance Center stated, "The possibility of CBDC commercialization has increased. Considering the ongoing technological revolution through blockchain and the trend of declining cash usage, CBDC has the potential to become a widely used currency."

They added, "However, since the impact on technology, finance, and economic systems is significant and central banks worldwide are approaching this cautiously, the possibility of short-term commercialization is very limited. CBDC implies a redefinition of the roles and concepts of currency, central banks, and financial institutions, so a careful approach is necessary."

The researchers identified key issues surrounding CBDC, including the necessity of its introduction, impacts on the banking system, existing private virtual assets, and monetary policy. They explained, "If considered a substitute for bank deposits, issuing CBDC raises concerns about bank disintermediation (withdrawal from financial institutions) and digital bank runs (mass withdrawals)."

Regarding the impact on existing private virtual assets, they said, "Since the purposes and underlying demands differ between the two, unless policies restrict private virtual asset investments through CBDC, the general consensus is that there will be little impact. However, there is also an opinion that demand for private virtual assets as a means of payment may decrease."

Furthermore, the impact of CBDC on monetary policy was noted to enhance the effectiveness of monetary policy by promoting domestic demand and alleviating deflationary pressures. In particular, it was explained that imposing negative interest rates could become a new monetary policy tool.

Additionally, the researchers stated, "During pandemics like COVID-19, it would be easier to implement the 'helicopter money' policy by directly depositing CBDC to individuals than before." They also added, "Although concerns were raised about the reduction of the dollar's influence as China proactively developed CBDC, many opinions suggest that the dollar's hegemony will be maintained."

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