South Korean regulatory bodies are showing a lot of whimsical behaviour for their stand on cryptocurrencies. Last year in September 2017, the country introduced a blanket bank on the operations of Initial Coin Offerings (ICOs), and in a recent twist of events, a group of legislators from the ruling Democratic Party of Korea, has proposed to reverse this decision andin the country.
Now taking things further, the latest report fromshows that the Bank of Korea is mulling on the idea of having a Central Bank Digital Currency (CBDC) which could likely be launched before July this year.
The Bank of Korea stated: “A taskforce has been studying the possibility of issuing a CBDC and how digital currencies will influence the country’s overall financial sector since January. We will announce updates on this issue by the end of June.”
The financial authority, however, has stressed that it will too early to take any such call at the moment and the bank will be considering several parameters before the issuance of CBDC. The bank also stated that it is currently observing the international developments taking place, which also needs to be considered.
However, there are worries that the sudden launch of CBDCs could pose a threat and destabilize traditional lenders. Economists say that general purpose CBDCs should be brought to the market with the aim that they can revolutionize the role of banks in the financial system as well transform the digital payments industry.
The Bank for International Settlements (BIS) believes that one day, CBDCs will be issued by the policymakers and central banks to settle payments among financial institutions. A senior economist at the Samsung Economic Research Institute said: “The critical factor that magnifies the way a market moves is sentiment. This is most important as a market could be pushed ahead by sentiment. The BOK’s interest in digital currencies isn’t that new, and is good in terms of market sentiment.”
Owing to the huge increase in the crypto trading activity within the local investor community and the growing worries of illicit activities like money-laundering and tax evasion, the financial regulators were seen taking swift action in this regard and introduced strict rules to prevent them.
The local cryptocurrency exchange operators in South Korea were asked to report their yearly earnings to the auditors and moreover, investors had to undergo through a mandatory KYC process at the exchange. Only those accounts who had linked to their respective banks with the official names were allowed to operate.
However, as many relevant agencies have failed to arrive at a consensus and design and optimized regulatory framework, the government has yet to decide on this matters said the Minister of Government Policy Coordination Hong Nam-ki. He also said that it is still “debatable” whether to ban trading in exchanges or to further make it mainstream.