Bank of Korea Governor Chang-yong Rhee has expressed concerns about the rise of stablecoins and their potential impact on central bank money and monetary policies. Speaking at a conference on digital money in Seoul, Rhee emphasized the need for central banks to issue their own digital currencies to counter this threat. He highlighted two main issues that central banks must address: the rise of stablecoins and the lack of regulatory framework for non-financial institutions in the digital financial system.
Rhee argued that stablecoins, despite their name, often lack stability and could undermine the role of central bank-issued money, thereby affecting traditional monetary policies. He also raised concerns about the involvement of global networks like Visa and Mastercard, which could complicate capital flows and monetary policy independence. To tackle these challenges, Rhee suggested the introduction of central bank digital currencies (CBDCs) in both retail and wholesale formats.
South Korea is already making efforts in this area, with a pilot project for a retail CBDC system that utilizes distributed ledger technology (DLT). Rhee highlighted the programmability of CBDCs through smart contracts as a significant advantage. The Bank of Korea is also collaborating with financial regulators and the Bank for International Settlements on a second CBDC pilot project, focusing on integrating a wholesale CBDC with tokenized bank deposits.
The views expressed by the Bank of Korea align with those of other major global central banks and financial institutions. The US Federal Reserve has highlighted the risks associated with stablecoins, particularly their volatility. The Bank for International Settlements has also raised concerns about stablecoins’ impact on monetary sovereignty and financial stability, emphasizing the need for stringent design and regulatory frameworks.
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| Information | Details |
|---|---|
| Geography | Asia |
| Countries | |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | Chang-yong Rhee |
| Companies | Bank for International Settlements, Visa, Bank of Korea, U.S. Federal Reserve, Mastercard |
| Currencies | None |
| Securities | None |
