The South Korean Government’s Stance on CBDC and Virtual Assets

On April 24th, it was reported that the definition of virtual assets in the virtual asset related laws currently being discussed in the South Korean parliament does not include provisions on CBDC (Central Bank Digital Currency). The government has always been skeptical about the need to distinguish between CBDCs and virtual assets, but the Bank of Korea actively insists that issuing CBDCs is necessary. It plans to grant CBDCs the status of legal tender to prevent uncertainty caused by confusion with virtual assets. The Political Affairs Committee of the South Korean National Assembly has revealed that they are currently promoting the exclusion of CBDC and its related services from the regulation of the Virtual Assets Act. This was proposed by Kim Han kyu, a member of the National Democratic Party and a member of the government council, with the aim of clearly distinguishing between CBDC and the virtual asset market and preventing policy chaos. The Financial Committee expressed opposition to the proposal on March 28th, but the media stated that the Committee may change its stance on April 25th. (Economic Pioneer)

Korean media: Korean authorities may clearly distinguish between CBDC and virtual assets in legal definitions

Introduction

On April 24th, it was reported that the South Korean government’s definition of virtual assets in the virtual asset related laws currently being discussed in the parliament does not include provisions on Central Bank Digital Currency (CBDC). This has led to confusion and debate over the need to distinguish CBDC from virtual assets, with the government’s skepticism and the Bank of Korea’s active insistence on issuing CBDCs.

The Need for Distinguishing CBDC and Virtual Assets

The Bank of Korea has been advocating for the issuance of CBDCs, as it believes that it is necessary to grant CBDCs the status of legal tender to prevent uncertainty caused by confusion with virtual assets. Virtual assets, such as cryptocurrencies, are not recognized as legal tender in most countries, leading to regulatory challenges and market instability. In contrast, CBDCs would be backed by the central bank and would function as a digital version of physical cash, providing more stability and reducing the risks associated with virtual assets.

The Proposal for Exclusion of CBDCs from Regulation

The Political Affairs Committee of the South Korean National Assembly has revealed that they are currently promoting the exclusion of CBDCs and its related services from the regulation of the Virtual Assets Act. The proposal was made by Kim Han kyu, a member of the National Democratic Party and a member of the government council, with the aim of clearly distinguishing CBDC from the virtual asset market and preventing policy chaos.

The Debate Over the Proposal

The Financial Committee expressed opposition to the proposal on March 28th, citing concerns over the potential risks associated with CBDCs, such as money laundering and terrorism financing. However, the media has reported that the committee may change its stance on April 25th, leading to further debate and uncertainty over the regulation of CBDCs in South Korea.

Conclusion

As the South Korean government continues to discuss and debate the regulation of CBDCs and virtual assets, it is clear that there is a need for clear and distinct definitions and regulations to ensure market stability and prevent policy chaos. While the Bank of Korea advocates for the issuance of CBDCs, concerns over potential risks and the need for regulatory clarity continue to shape the debate over the future of these digital assets in South Korea.

FAQs

1. What is CBDC?
CBDC stands for Central Bank Digital Currency, which is a digital version of physical cash that is backed by the central bank.
2. Why is there debate over the regulation of CBDCs and virtual assets in South Korea?
The South Korean government has been skeptical about the need to distinguish CBDCs from virtual assets, while the Bank of Korea actively advocates for the issuance of CBDCs. The proposal for exclusion of CBDCs from regulation has led to further debate and uncertainty over the regulation of these digital assets.
3. What are the potential risks associated with CBDCs?
CBDCs may be used for money laundering and terrorism financing, leading to concerns over the potential risks associated with their issuance and circulation.