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Bank of Korea to form central bank digital currency research task force

Image: Yonhap

Fri, 27 Dec 2019, 10:21 am UTC

The Bank of Korea (BoK), the central bank of South Korea, has announced its plans to form a task force focused on central bank digital currency (CBDC) research.

The BoK revealed its plans its “Monetary Policy for 2020” brief published today, Dec. 27. The central bank said:

“The Bank will continue to build on the research into new innovations such as distributed ledger technology, crypto assets, and CBDC, and play an active role as overseer to enhance the security of the settlement systems. The Bank will organize a task force dedicated to CBDC research and recruit additional experts.”

The Korea Times reported that the BoK posted a job opening for digital currency experts on Dec. 10.

In addition, the BoK said that it will engage in discussions with the Bank of International Settlements (BIS) and other international organizations and closely watch the CBDC initiatives of other central banks.

“Based on the ‘Principles for Financial Market Infrastructure,’ the Bank will enact assessment principles, reflecting domestic conditions, to improve the effectiveness of its oversight of the payment and settlement systems,” it added.

Earlier this year, BoK researchers published a study that explored the effects of CBDC issuance on financial stability. They used a model in which commercial bank deposits compete with the central bank deposits in CBDC account and public could access CBDC via direct deposit at the central bank.

“[O]nce the central bank can lend all the deposits in CBDC account to commercial banks, an increase in the quantity of CBDC which does not require reserve holdings can enhance financial stability by essentially increasing supply of private credit and hence lowering nominal interest rate,” the authors wrote.

Back in 2017, the central bank researchers had also analyzed a dual currency regime with fiat currency and digital currency and explored potential crowding-out effects of fiat currency or digital currency under the framework of the traditional monetary economic model.

Just recently, the European Central Bank (ECB) published a paper “Exploring anonymity in central bank digital currencies,” which detailed a CBDC proof-of-concept (PoC), called “EUROchain,” established by the European System of Central Banks (ESCB) under the coordination of the central bank itself.

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