South Korea Warns on Central Bank Digital Currencies – Banks Do Research


A brand-new warning from South Korea’s central bank comes with the announcement that this regional economic power will not pursue a national coin itself.

Reporting today shows that South Korea has decided against creating a state-backed digital currency based on blockchain that would integrate with the country’s fiat currency.

Government officials cite six months worth of consultation with the Bank of Korea which, according to reports, warned that researchers have found CBDCs could result in a lot of withdrawals from private institutions – they argue that this would do to negative things – first, it would squeeze liquidity and stress the ‘money on the street’ reality, and also it could push up interest rates at a time when low interest rates are spurring economic activity.

“Demand deposits are one of the biggest sources of loans by banks,” BOK researcher Kwon Oh-ik reportedly told news agency Yonhap. “When people pull out their money, banks raise rates, or lower the reserve ratio, to secure more funds.”

Some of those reading global news about cryptocurrencies might consider South Korea’s ruling to be a blow against Bitcoin and other coins – but there’s a subtext here that it’s also interesting.

The same Cointelegraph report that cites South Korea’s decision also notes that a Swiss organization researching global finance has found that 70% of central banks worldwide are conducting some sort of research on central bank digital currencies.

The implication here is that if so many banks are actively investigating, that argues for the relevance of CBDCs in the global context, and indicates that that might grow the blockchain sector over time – leading blockchain to become, in the words of some enthusiasts, “the new Internet.”

Some traders take that to mean that eventual institution of the adoptions will move markets up.

They’re likely to be quietly doing their due diligence and trying to find secondary cryptoassets or diverse crypto plays that will gain with that eventual adoption.

Some traders might take an even more sophisticated approach and look at what each of these researching banks has to say. Putting all of that research together, you get a much smarter analysis of cryptocurrencies and you can see where public officials are going in the finance sector. That could give you valuable information for your own crypto portfolio. It’s another way to use a more standardized and technical analysis to figure out whether now is a good entry point for any given coin holding.