South Korean Regulator Deems State Tokens Dangerous For Banks
The Bank of Korea (BoK) believes that issuing a national cryptocurrency can put pressure on local banks. This statement came a week after the regulator’s refusal to issue state-backed tokens, Yonhap reports.
The major South Korean bank came to such a decision after lengthy consultations. Its report says that the release of a national cryptocurrency will be followed by a massive withdrawal of funds from private banks. This jeopardizes the liquidity of non-state financial institutions, as well as increases their interest rates.
Representatives of the central bank compare state token to a BoK-issued account: people trust it more than any commercial bank. Customers' deposits are the main source of lending capacity for such enterprises, and the withdrawal of funds will force private banks to increase interest rates or lower the reserve coverage.
The South Korean authorities have not altered their strong principles concerning digital currencies. In January, the government confirmed that it does not intend to lift the ban on ICOs in the country. Also, the requirements to crypto exchanges remain tough — only 7 platforms managed to pass the audit in January.
At the same time, the rest of the world views national cryptocurrency with great interest. According to a report by the Bank for International Settlements (BIS), 70% of all central banks are exploring the possibility of issuing state-backed tokens.
Last November, Christine Lagarde, the head of IMF, urged central banks to think about issuing cryptocurrencies.
Previously, the Marshall Islands announced the release of the physical equivalent of their stablecoin.