Bank of Korea Governor Advocates Urgent CBDC Introduction: Insights from the Report

Rhee Chang-yong has raised concerns about the widespread use and inherent volatility of stablecoins, such as tether (USDT) and USD Coin (USDC), warning that these factors could undermine the effectiveness of central bank monetary policies. The challenges posed by stablecoins, which often deviate from their implied stability, were reported by Yonhap News on Friday.

Addressing the Digital Money: Navigating a Changing Financial Landscape conference, Rhee stressed the urgent need for central banks to explore the incorporation of central bank digital currencies (CBDC), whether in retail or wholesale formats. He highlighted the potential risk that the widespread adoption of stablecoins might reduce the significance of central bank-issued money, posing a threat to the effectiveness of monetary policies.

This concern becomes more pronounced as the stability of stablecoins, cryptocurrencies linked to fiat currencies like the dollar or euro, faces increased scrutiny. S&P, a prominent ratings company, introduced a system this week to evaluate this specific characteristic. In its assessment of eight coins, including the largest stablecoin by market value, tether, none received the highest rating, and tether was placed just one rank above the lowest on S&P's five-point scale.

Rhee also revealed that the Bank of Korea is actively involved in developing a pilot program for wholesale CBDC and exploring its potential application in tokenizing real-world assets, as reported by Yonhap. The bank has previously outlined plans for a retail pilot involving 100,000 participants set to launch in the coming year.

Read More: Federal Reserve Governor Challenges the Viability of a U.S. CBDC and Addresses Concerns Over Stablecoins