Lee Ju-yeol, the governor of the Bank of South Korea (BOK), recently indicated that when CBDCs are introduced, the demand for Bitcoin and other cryptocurrencies as a payment method is expected to decline.
Regarding the CBDC, Lee Ju-yeol said: «We have been consulting on the CBDC pilot system. And, we plan to build and test the pilot system starting in the second half of this year.».
He explained that through this test he plans to verify if the system works correctly at each stage, such as issuance, distribution and exchange.
“Before issuance, the technical requirements need to be thoroughly verified, while an in-depth review of the impact of a CBDC on the financial system is necessary.”
He added: «The introduction of a CBDC has a problem that requires the modification of many laws. So you have to be very cautious».
Demand for Bitcoin Will Fade According to Lee Ju-yeol
In a way, these comments from Lee come as the Bank of Korea prepares to test its own CBDC later this year.
In fact, Lee Ju-yeol said that for cryptocurrencies like Bitcoin: «I believe that there are limitations in its operation as a means of payment and storage of value, due to the high volatility of prices».
Also, he indicated that the CBDC investigation should be continually promoted. Regardless of whether it is entered or not.
Finally he said: «If the central bank digital currency is introduced in the future, the demand for cryptocurrencies as a payment method is expected to decrease.».
Cryptocurrencies have no intrinsic value
Incidentally, Bank of South Korea Governor Lee Ju-yeol said last month in a major business report by the National Assembly’s Finance and Planning Committee that: “Crypto assets like Bitcoin have no intrinsic value».
He also stated: «It is very difficult to predict the price, but I think it will be extremely volatile.».
In this regard, Lee Ju-yeol cited a number of factors, including global concern about excessive inflation. In addition, the growing institutional interest.
“These assets experienced a sharp rise in a very short period of time. I would say that institutional investors’ valuation of using Bitcoin as a hedge could be interpreted as another factor.
The BOK progresses with its digital currency
To this end, according to The Korea Times, Lee claimed that the BOK is making progress with its central bank digital currency.
With this intention, Lee opined: «The bank is close to completing our review of relevant designs and technologies in relation to bank-controlled digital currencies.».
In short, payment methods have been evolving for a long time. But, the pandemic has given a strong push to this trend that seems definitive. For this reason, central banks are accelerating their projects to launch CBDCs.
I say goodbye with this phrase from Lee Ju-yeol: «When it comes to a CBDC, it is better to do it right, rather than fast».