The Central Bank of South Korea states the launch of a central bank digital currency (CBDC) may have "negative consequences on the South Korean financial system," cites the bank's report Yonhap News Agency.
According to the bank’s report, such kind of national asset may cause a liquidity shortage and pushing up interest rates.
However, the bank admits that the launch of CDBC will replace demand deposits service that is held by local commercial banks as people may think the national digital currency is far safer.
One of the co-authors of the bank’s report, Kwon Oh-ik, claims that CDBC is a kind of "a BOK-issued bank account."
"People trust it more than one in a commercial bank. Demand deposits are one of the biggest sources of loans by banks. When people pull out their money, banks raise rates, or lower the reserve ratio, to secure more funds," Kwon Oh-ik said.