South Korean Central Bank Governor Lee Ju-yeol believes that once central bank digital currencies are launched, Bitcoin and other cryptocurrencies will no longer be in demand.
Yeol explained that the high volatility of bitcoin prevents it from becoming a reliable tool for preserving wealth and an effective means of payment. According to him, bitcoin has no intrinsic value, and this is the main obstacle to its widespread adoption. So when central banks introduce their own stablecoins pegged to local currencies, demand for bitcoin will drop sharply, Yeol said.
Many central banks have already begun to explore the possibility of launching digital currencies, including the Bank of Russia. The People’s Bank of China (PBOC) has repeatedly tested the digital yuan in different cities, and at the beginning of the year, photos of a hardware wallet for the digital yuan appeared on the network. Bank of Jamaica has also expressed its readiness to make the transition to digital currency.
Given the Central Bank’s interest in digital currencies, Yeol said that at the end of the year, the Bank of Korea also plans to begin testing its own stablecoin for payments and bank transfers. Earlier, analysts from the Central Bank of South Korea concluded that government cryptocurrencies are similar to fiat currencies and meet legal tender requirements, unlike private cryptocurrencies.
However, the Governor of the Bank of Korea said that before launching a digital currency, it needs to be thoroughly tested for compliance with technological requirements, as well as to study the consequences of launching such a currency and its possible impact on the country’s financial system.
The Governor of the Bank of Korea recently said that when it comes to central bank digital currencies, it’s best to go “the US path” – not rush to launch. Now, however, he is beginning to change his mind on the issue, as is Federal Reserve Chairman Jerome Powell. Powell said this month that government digital currencies must function alongside regular money in innovative and flexible payment systems.
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