Bank of Korea: CBDCs Are Fiat Currency Not Virtual Assets

Some legal changes would be needed before a potential central bank digital currency launch in South Korea, research indicates.

AccessTimeIconFeb 8, 2021 at 3:13 p.m. UTC
Updated Sep 14, 2021 at 12:08 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The Bank of Korea (BOK) has published the results of research it conducted last year on the legal issues surrounding central bank digital currencies (CBDC).

The research concludes that a CBDC would meet the requirements of currency legislation and could be freely exchanged with cash as the two share the same legal status. Therefore it would be reasonable to treat a CBDC in the same way as cash deposits held by financial institutions, CoinDesk Korea reported Monday.

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

Considering how a CBDC would fit into South Korea’s existing legal framework, the research suggests it would not be subject to the Financial Transactions Act, as a CBDC issuance would be based on monetary authority and not for profit.

However, the research emphasizes the Bank of Korea Act would need to be amended to accommodate the issuance of a digital currency, because the act only accounts for notes and coins at present.

Comparison with virtual assets such as cryptocurrencies, according to the research, are difficult as a CBDC “has a clear issuer," the central bank, and is based on the exclusive power of that issuer. This differs from virtual assets which are described as digital certificates with economic value that can be traded or transferred electronically.

Therefore, as the CBDC would not be considered as property, the law would not be able to establish crime such as theft, embezzlement or stolen property. However, given that electronic records are defined as objects of property, it would be possible to apply laws relating to robbery, fraud, intimidation and damage. 

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.