Growing Stablecoin Usage Endangers Central Bank Operations, Says Bank of Korea Chief

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Last Updated on December 19, 2023 by Bitfinsider

The governor of the Bank of Korea, Rhee Chang-yong, believes that the increasing use of stablecoins like USDT and USDC is a new danger to the functioning of central banks and may be decreasing the effectiveness of monetary policy. Chang-yong, in a speech at a recent conference on digital money, encouraged central banks to get ready for digitization if they want to stay up to date with the rapidly evolving financial sector.

According to a Yonhap story, the governor of BOK thinks that the probable use of stablecoins by international networks like Visa and Mastercard will threaten the monetary independence of nations like South Korea. Chang-yong thus advocated for the introduction of central bank digital currencies (CBDCs) in order to prevent stablecoins from severely impairing capital inflows into his nation.

The BOK governor allegedly stated, “This underscores the urgency for central banks to consider introducing central bank digital currencies (CBDC), whether retail or wholesale.”

Chang-yong accepted that there might not be a certain benefit for retail CBDCs over traditional payment methods, but he maintained that these digital currencies can introduce “a realm of possibilities” because of its programmability feature. Using smart contracts to automatically carry out intricate and conditional transactions is one such approach.

The BOK also disclosed that South Korea is developing a wholesale pilot project in addition to its ongoing retail CBDC system trial project. Financial regulators and the Bank for International Settlements (BIS) are the project’s partners for the South Korean Central Bank.

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