China sparked a debate that is spreading like wildfire throughout the world. With the developments surrounding Beijing’s Digital yuan, a project which has been in development for over a year, competing countries are rushing to establish their own Central Bank Digital Currencies [CBDC]. However, some are not buying into this claim.
South Korea, a country away from the eastern border of China, is not of the opinion that a digital equivalent of the Korean won [KRW] is the need of the hour. Hong Kyung-sik, Bank of Korea’s [BoK] Head for Banking and Financial Affairs, claimed at the Future of Payments’ conference that for developed countries, a sovereign virtual currency is of little use.
In developed countries such as South Korea, the banking system and payments infrastructure is already strong to support the country’s economy and hence, a digital currency will serve little purpose in this regard. He said,
“In Korea, we already have advanced payment and settlement infrastructure. In addition, the degree of openness is also internationally high.”
From the aforementioned foundation, payment applications and credit cards also improve the speed at which funds can be transferred, both domestically and internationally. The Korean banking system has been quite open and it allows several finance and technology companies to thrive in the peninsula country.
Other countries where the aforementioned financial infrastructure is absent may see a use-case for CBDCs, he stated. Developing and under-developed countries which require channels of monetary flow from a top-down system could benefit from a digital equivalent of their fiat currency.
This sentiment of developing countries inching closer to launching a digital currency was backed by a report by IBM and the Official Monetary and Financial Institutions Forum.