December 15, 2023
SEOUL – Regulating digital currency is a major priority on the global agenda, International Monetary Fund Managing Director Kristalina Georgieva said at an international conference held in Seoul on Thursday.
“We must consider the effects if crypto assets become widespread. The scenario is not far-fetched,” Georgieva said in her opening speech at the event co-hosted by the Ministry of Finance, Bank of Korea, Financial Service Commission, and the International Monetary Fund. The event was held under the theme of “Digital Money: Navigating a Changing Financial Landscape.”
“The challenge is that high crypto asset adoption could undermine macrofinancial stability. And crypto could undermine fiscal sustainability if tax collection became volatile or more difficult to enforce,” she said.
“Our goal is to make a more efficient, interoperable and accessible financial system by providing rules to avoid the risks of crypto, and infrastructure by leveraging some of its technologies.”
Korea’s Finance Minister Choo Kyung-ho, speaking after Georgieva, further stressed that authorities have to respond to the rise of digital money.
“Despite the challenges we face, it is clear that the transition to digital money is already happening, and it is unstoppable,” Choo said, stressing the need to establish related policy tools that can ensure reliability and stability.
He further explained the authorities have to stay nimble to customize regulations, focus on building public trust and stability, and set up global standards.
The first panel discussion of the day focused on digital money and its role in the global economy, with Georgieva; Stefan Ingves, former governor of Sveriges Riksbank, Sweden’s central bank; Financial Services Commission Vice-Chairman Kim So-young and more.
At the discussion, panelists agreed that the Central Bank Digital Currency can provide high interoperability for users. The Bank of Korea has been pushing for the introduction of the CBDC, planning a real-world pilot testing in the fourth quarter of next year.
“The answer is on the technology side,” David Rutter, CEO and founder of US blockchain tech company R3, said. “The technology is just in the neighborhood to building a more efficient global monetary system.”
The discussion was followed by another which looked into the possible use cases of digital money. Sungkyunkwan University Associate Professor Lee Seung-duck; Kelvin Li, head of Ant Group’s global fund platform, and more participated as panelists.
“The CBDC money can be utilized as a payment means where predefined economic activity can be traced and verified,” said Li from Ant Group, a fintech company under the Chinese retail giant Alibaba.
“The CBDC enables direct and fast transactions between participating countries. It is a program of money which can improve the transmission efficiency,” Li said, stressing digital money can streamline the complicated process of traditional cross-border transactions.
While there are concerns that digital money transactions could lead to privacy breaches, professor Lee explained the introduction of the CBDC could rather enhance privacy as data can be protected when needed.
“This could be beneficial for both developing and advanced countries from the perspective of privacy protection, as digital money enables transactions without tracking or collecting data. This can build trust in the digital monetary system,” Lee said.
The last panel discussion of the day delved into the roles of standard-setting bodies in the crypto ecosystem, inviting Steven Maijoor, the executive board of De Nederlandsche Bank, the Dutch central bank; Jun Yo-seop, an official from the Financial Services Commission; Neil Esho, secretary general from the BIS, and more as panelists.
Jun mentioned the “kimchi premium” which describes the boosted prices of cryptocurrencies in South Korea’s exchanges compared to the international peers, backed by Koreans’ fervent interest in crypto.
“Kimchi premium grew as the local authorities did not have any regulations for the crypto market at the time,” Jun said. “But after the authorities implemented regulations through administrative guidances, the price gap has narrowed, also partly from the overall crypto market cooling down.”
“With the introduction of the Virtual Asset User Protection Act from next year, we expect the kimchi premium to further diminish,” he said.
The event will continue throughout Friday, covering the coexistence of privately issued stablecoins and the CBDCs, the cross-border use of the CBDCs, and the role of central banks in the digital economy.