South Korea Forms Task Force for Central Bank Digital Currency Research

South Korea's central bank, the Bank of Korea (BOK), plans to organize a task force dedicated to central bank digital currency (CBDC) research in the new year.

In its “Monetary Policy for 2020” brief, published on Dec. 27, BOK said it would continue to build on its existing research into distributed ledger technology, crypto assets, and CBDCs and to play an active role in overseeing and enhancing the security of payment and settlement systems. 

Recruiting digital currency experts

As part of its CBDC research agenda, BOK ostensibly plans to recruit additional experts in the field. On Dec. 10, the institution had posted a job listing for digital currency experts, according to a report from the Korea Times.

In parallel to organizing its task force, BOK says it will actively engage in discussions with the Bank of International Settlements (BIS) and other relevant international entities to keep abreast of CBDC development at other central banks.

The bank says it plans to use BIS’ Principles for Financial Market Infrastructures (PFMI) to enact assessment principles for improving its oversight of domestic financial systems. 

The PFMI is a framework established by the BIS for managing market risks such as credit, liquidity, custody, settlement, operational and investment risks across payments systems, securities settlement systems, trade repositories and other infrastructures.  

BOK has previously stopped short of pursuing retail CBDC issuance

As previously reported, a CBDC is a digital currency issued by a central bank, which has the status of legal tender and other properties of centralized, fiat money.

Having examined the possible legal and social effectiveness of a CBDC project, BOK concluded in January 2019 that there was no reason for the bank to issue a CBDC that would be available for the wider public in the near future.

CBDC research by central banks globally has broadly separated the study of the benefits of a “retail” or “general purpose” CBDC accessible to the general public from “wholesale” variants of CBDCs, which would be limited for use by financial institutions.

The BIS has in the past warned that "a general purpose [retail] CBDC could give rise to higher instability of commercial bank deposit funding” and potentially fuel faster bank runs.

France plans to pilot a wholesale CBDC in 2020, the bank’s governor, François Villeroy de Galhau, revealed earlier this month.