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Bank of Korea: CBDCs Are Fiat Currency Not Virtual Assets

Some legal changes would be required before a possible central bank digital money launch in South Korea, research indicates.

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Bank of Korea: CBDCs Are Fiat Currency Not Virtual Assets

The Bank of Korea (BOK) has released the results of study it conducted this past year on the legal problems surrounding central bank electronic currencies (CBDC).

The study concludes that a CBDC would satisfy the demands of currency legislation and may be traded with money as both share the same legal status. Therefore it would be reasonable to treat a CBDC in precisely the same way as money deposits held by financial institutions, CoinDesk Korea reported Monday.

For this reason, it is suggested the BOK,'' South Korea's central bank, should possess the legal basis for applying positive or negative interest rates on a future CBDC. It is going to also have to be decided whether the BOK would swap the CBDC for cash with customers directly or via an intermediary agency.

Considering the way the CBDC would fit into South Korea's present legal framework, the study suggests it wouldn't be matter to the Financial Transactions Act, as a CBDC issuance could be based on monetary authority and not for profit.

However, the research highlights the Bank of Korea Act would need to be amended to accommodate the issuance of an electronic money, because the act only accounts for notes and coins at present.

This is different from virtual resources which are described as electronic certificates with economic value which may be traded or moved electronically.

So, as the CBDC would not be considered as land, the legislation would not be able to establish crime such as theft, embezzlement or stolen land. However, given that digital documents are defined as items of land, it could be possible to apply legislation concerning robbery, fraud, intimidation and damage.

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