Bank of Korea says digital currencies could threaten commercial banks

09 Feb, 2019 | Updated: 09 Feb, 2019
by David Borman
Bank of Korea says digital currencies could threaten commercial banks

It is being reported by the Yonhap News Agency that the Bank of Korea (BOK) has issued a report in which they assess that a central bank issued digital currency (CBDC) could undermine the stability of commercial banks in the country.

The idea is that any digital currency issued by a central bank would almost certainly be considered more secure than storing funds in a commercial bank. This could lead to a withdrawal of funds and issues with liquidity with such banks.

Kwon Oh-ik, one of the report's authors, had this to say:

"The CBDC is a kind of a BOK-issued bank account. People trust it more than one in a commercial bank... Demand deposits are one of the biggest sources of loans by banks. When people pull out their money, banks raise rates, or lower the reserve ratio, to secure more funds."

Fortunately, South Korea's central bank said recently they have no plans to launch a CBDC, so this issue should be fine for some time.

It is interesting to note that the report seems to feel that a digital currency undermining traditional banking would be an economically bad thing, but digital currencies were basically invented to undermine commercial banks. It would just be funny to see it happen at the hands of a central bank, and not crypto-anarchists.

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Read more about: South Korea


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