The South Korean central bank – the Bank of Korea (BOK) – wants Seoul to draw a line between central bank digital currencies (CBDCs) and cryptoassets, and hopes the government will make an eleventh-hour adjustment to a key crypto law that promulgates next month.
The BOK made its recommendation in a new report that comprises input from experts from a range of different sectors and examined the legality of a CBDC issuance under existing legal frameworks.
Leading legal academics from Seoul National University and Hanyang University took part in the project.
And the report’s authors, per ZDNet Korea, concluded that the most important matter that the BOK should consider should it issue a CBDC was to ensure that “as a legal currency, [a CBDC] must have the same status as” banknotes and coins “in terms of issuance and legal weight.”
The authors added that the terms of the new law do not seek to make a distinction between crypto and CBDCs. They urged lawmakers to set out a legal distinction before the regulation comes into force by adding new CBDC clauses – even though the nation is still a long way off digital won issuance.
The authors wrote,
“Under current legislation, virtual assets issued by institutions other than the Bank of Korea cannot be considered CBDCs, regardless of their names.”
They added, “A CBDC is not a cryptoasset. This is true because there is a clear issuer [of the token] (namely the BOK).”
The new law defines cryptoassets as “electronic certificates that can be traded or transferred electronically and having economic value, regardless of the presence or absence of an issuing body.” Unamended, the BOK report stated, this definition would also apply, de facto, to a CBDC.
In the same report, the authors claimed that the BOK should take great care to ensure that a CBDC was inclusive and did not fail to meet the needs of “vulnerable individuals.”
The bank added that it intends to launch a CBDC pilot in a “virtual environment” this year, with tests conducted on the prototype digital won’s functionality and safety features. Learn more: Economists: CBDCs to ‘Flop’ if They Aren't Designed as Stores of Value 86% Of Surveyed Central Banks Now Engage In CBDC Work - BIS COVID-19 Pandemic Accelerated Rollouts Of 'Game-Changing' CBDCs Expert Warns CBDCs Won’t Carry the Same Advantages as Bitcoin 2021 Trends in CBDCs: More Pilots, Maybe Some Launches, But Not For Retail How CBDCs Might Change Our Daily Payments Legally Speaking, is Digital Money Really Money?