Bank of Korea Chief on CBDC: Better Right Than Fast

Bank of Korea Governor Lee Ju-yeol isn’t bullish on bitcoin, but he sees potential in a central bank digital currency (CBDC), if it’s done right. 

Speaking at a press conference on Thursday, Lee said that when it comes to a CBDC, it’s better to do it right than do it fast, citing the cautious approach taken by the U.S. 

The comments came after Lee was questioned if South Korea was prepared for China’s upcoming CBDC rollout. In late 2020, an official at the People’s Bank of China said the CBDC launch should be accelerated. China has become a global leader in the CBDC space, with the country’s biggest cities joining pilot programs this year. The U.S., meanwhile, is taking a much slower approach.

At Thursday’s press conference, Lee said China’s CBDC pilot will have little impact on South Korea’s well-established won-based payments system.

But the country has been working on its own CBDC for a while now. Lee announced the Bank of Korea had been exploring a CBDC in 2018. 

In 2020, the nation’s central bank formed a legal panel to advise on how a digital currency might be launched. Later in the year, the bank announced that a CBDC pilot will take place in late 2021. Earlier this month, the bank published research showing a CBDC can be recognized as a legal fiat currency instead of a virtual asset. 

Appearing before the National Assembly Strategy and Finance Committee on Tuesday, Lee said the CBDC pilot will be modified, and promised improvements to institutional and technical research, CoinDesk Korea reported.

CoinDesk Korea also reported that at the National Assembly on Tuesday Lee was somewhat bewildered by the recent bitcoin price run. 

"It is difficult to understand why the price of bitcoin is so expensive. U.S. Treasury Secretary [Janet] Yellen also warned against cryptocurrency investment," Lee said at the assembly.

“A crypto asset (cryptocurrency) is an asset that has no intrinsic value,” Lee also said. 

He is not the only government official to express a wariness of cryptocurrency. Secretary Yellen has repeatedly warned in recent weeks about the use of cryptocurrencies to fund terrorist activities. Meanwhile, the governments of India and Nigeria are cracking down on local crypto markets. Shaktikanta Das, the governor of India’s central bank, said Wednesday the bank is worried about the risks cryptocurrencies pose to financial stability.   

In 2017, at a government assembly, Lee rejected the classification of crypto assets as currencies, saying they are a kind of commodity. The following year, CoinDesk reported Lee still thought cryptocurrencies are not a legal form of currency.

However, at Tuesday’s event Lee acknowledged potential reasons for the recent mainstream appeal of bitcoin as an investment. 

“As I understand it, the massive bitcoin rally is the result of various factors such as Tesla CEO Elon Musk's purchase of a massive quantity, investors who see it as a hedge against inflation and some financial institutions beginning to offer bitcoin trading brokerage services." Lee said.