The Bank of Korea governor Rhee Chang-yong recently stated that the growing stablecoin use threatens the operations of central banks. The possible involvement of global networks like Visa and Mastercard in the stablecoin business will likely undermine the monetary independence of countries like South Korea.
Central Banks Urged to Prepare for Digitization
The growing use of stablecoins like USDT and USDC is posing a new threat to the operations of central banks and may be making monetary policies less effective, according to Rhee Chang-yong, the governor of the Bank of Korea. Speaking at a recent digital money conference, Chang-yong urged central banks to prepare for digitization if they wish to keep abreast with the fast-changing financial landscape.
A Yonhap report states that the BOK governor believes global networks such as Visa and Mastercard’s likely involvement with stablecoins will undermine countries like South Korea’s monetary independence. Therefore, to stop stablecoins from wreaking havoc on his country’s capital inflows, Chang-yong proposed launching central bank digital currencies (CBDCs).
“This underscores the urgency for central banks to consider introducing central bank digital currencies (CBDC), whether retail or wholesale,” the BOK governor reportedly said.
While he conceded that retail CBDCs may have no clear advantage over regular payment methods, Chang-yong insisted that their programmability feature allows such digital currencies to bring with them “a realm of possibilities.” One such possibility is the execution of complex and conditional transactions automatically via smart contracts.
Meanwhile, the BOK also revealed that South Korea, which has already launched a pilot project for a retail CBDC system, is working on a wholesale pilot project. The South Korean Central Bank’s partners for the project include the Bank for International Settlements (BIS) and financial regulators.
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