Is South Korea’s Central Bank Set to Make a Digital Fiat U-turn?

South Korean media commentators are asking if the central Bank of Korea (BOK) has made a policy reverse on its stance towards central bank digital currency (CBDC) issuance.

Sisa Journal reports that the BOK appears to have changed its tune on CBDCs of late.

Last month, the BOK stated that it was “in the process of looking into” possible CBDC issuance – less than a year after stating that South Korea had “little or no need” for a digital fiat.

But Lee Jeong-cheol, a blockchain business consultant based in Seoul, told Cryptonews.com,

“I’d be surprised if the BOK does rush into issuing a CBDC at this stage. There have been reports that some of the bigger local stablecoin projects have been struggling, and Seoul’s Zero Pay [cashless e-pay solution] has been getting bad press. Government-run digital coins are now a thorny subject. I think the BOK’s change of wording simply reflects the fact that the G7 has asked central banks to be open-minded about CBDC issuance.”

Per the Korea Herald, Seoul’s much-vaunted Zero Pay initiative has been receiving very little in the way of traction from capital residents, with the media outlet stating the project has had “zero impact.”

And Seoul is likely to have carefully considered the G7’s recommendations on CBDC – particularly after the French central bank last month spoke about possible digital euro pilot projects.

Regardless, Sisa Journal claims that developments much closer to home may be influencing the BOK – and hints that the government could be getting concerned about an imminent Chinese digital fiat launch.

Seoul is not used to getting outpaced in the IT sector by Beijing – and the BOK could well be keen to avoid a scenario whereby China’s CBDC outshines both the Korean won and the USD to become East Asia’s dominant currency.
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Learn more: Central Bank Digital Currencies: 4 Questions and Answers