‘A Moral Hazard’: Bank of Korea Opposes Central Bank Digital Currency

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The Bank of Korea (BoK) has revealed it is against the idea of issuing a central bank digital currency following a feasibility review.

South Korea’s central bank isn’t keen on issuing a central bank digital currency (CBDC) citing concerns related to its impact on the basic mechanics of monetary policy and implementation as well as the bank’s influence on open market operations, a report released on Monday revealed.

As reported by the Korea Times, the BoK is also concerned about costs related to issuing a digital currency alongside the potential ‘moral hazard’ it could cause. Pointedly, BoK researcher Kwon Oh-ik at the central bank’s economic research institute argued that a central bank digital currency would ‘destabilize the market order’ by claiming digital currencies do not function as money.

The researcher said in the report:

We reviewed the possible feasibility of digital currencies as currency; however, our thoughts are that digital currencies have been exposed to various categories of risk associated with credit, liquidity...