Bank: “In order to revitalize the deposit token business, institutionalization and law revision are necessary” [‘현금 없는 사회’ 新디지털금융시대 (下)]

Innovative financial service extension method is burdensome
Revision of the Banking Act and Depositor Protection Act is necessary.
Concerns about expansion of the Bank of Korea’s control and financially vulnerable groups
Financial Services Commission “Review after actual transaction test”

There is an analysis that the implementation of the system and amendment of the law are essential for banks to begin the deposit token business in earnest after the central bank digital currency (CBDC) real transaction test. In particular, the will of not only the Bank of Korea, which is leading the CBDC real transaction test, but also the financial authorities, who have opened the way for financial consumers to test deposit tokens through innovative financial services, is important.

The financial authorities are in the position that when deposit tokens are used as a means of payment or payment of national subsidies, they will comprehensively check the possibility of contributing to innovation in financial services, such as lowering fees, as well as side effects and protection of financial consumers during the actual transaction test period, and decide whether to institutionalize it. . However, considering the sentiment of some who reject CBCD and the impact that a cash-free society will have on the financially vulnerable, the advice is that the transition to digital currency should be made from an inclusive finance perspective.

■Financial institutional framework must be established for investment

According to the financial industry on the 18th, in order for the deposit token business, which has been designated as an innovative financial service, to be activated over the next two years, institutionalization procedures by the financial authorities and the Bank of Korea after CBDC real transaction testing are necessary.

This means that banks must have a clear institutional foundation to designate deposit tokens as a bank business by amending the Banking Act, the Depositor Protection Act, and the Electronic Financial Transactions Act, which provide special provisions for innovative financial services, in order for banks to begin investing in infrastructure for the deposit token business. .

Previously, on the 30th of last month, the Financial Services Commission designated ‘deposit token-based payment and transfer services within the CBDC system’ as an innovative financial service. Seven banks, KB Kookmin, Shinhan, Hana, Woori, Enterprise, NH Nonghyup, and Busan Bank, opened an exceptional path for testing payment and transfer services using CBDC-based deposit tokens.

The Financial Services Commission believed that public convenience could be improved if deposit tokens were used in connection with stock trading as well as payments. However, because it is not yet clear whether deposit tokens can be considered deposits, both the Financial Services Commission and the Bank of Korea have granted special exemptions in the Banking Act for unique business, ancillary business, and concurrent business.

An official from a commercial bank said, “Digital transformation is an unstoppable trend, and has already accelerated in major developed countries. It will accelerate further with the election of Donald Trump, the so-called ‘first president to recognize virtual assets.’” He added, “We will extend innovative financial services.” “It is a burden for the bank to continue the deposit token business in this way,” he said. He then emphasized, “It is time to establish a clear institutional framework by revising the Banking Act and the Depositor Protection Act.” Another banking official also said, “Costs can be greatly reduced by digitizing the voucher business through deposit tokens. This is a business that banks want to try, but for banks to invest, institutionalization must come first.”

The Financial Services Commission’s position is that discussions on institutionalization will be made carefully after six months of actual transaction testing by banks. An official from the Financial Services Commission said, “There is a purpose for designating it as an innovative financial service, including expected effects,” but added, “We will watch carefully as there are still many uncertainties.”

■Concerns about Big Brother loan and expansion of financial alienation

Stable coin holders’ rejection of CBDC is a problem that needs to be solved. This is because there are concerns that if CBDC led by the Bank of Korea is activated, the price of decentralized stable coins may plummet. Right now, President-elect Trump said, “We will stop the development of CBDC by central banks,” and claimed, “There is a possibility that CBDC will lead to coercive control by the central government.”

This is the so-called ‘Big Brother’ theory that the government can track all economic activities of individuals.

There are also concerns that activation of deposit tokens may increase financial alienation among the financially vulnerable to the point where they are unable to open bank accounts, let alone credit cards.

The ‘CBDC-related legal issues and legislation re-/revision status’ service report published by the Bank of Korea’s Financial Clearings Department said, “A cautious approach is needed in that users who are vulnerable to the digital environment may not be able to use payment methods and thus be excluded from economic activities. “It is necessary,” he advised, “while reviewing related legislation to ensure the right to use cash when necessary in emergency situations, it is necessary to allow physical-based token-type CBDC within a limited scope.”

[email protected] Reporter Park Moon-su and Park So-hyun

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Q: What role does consumer education play in the successful adoption of deposit tokens ​by traditional banks?

Thank‍ you for your request. I have divided the interview ⁢into two thematic sections based on the key topics covered in the article:

1. Institutionalization of the deposit token business:

‍ Q: What are the necessary steps for banks to begin the deposit token ​business?

Q: How‌ would designating deposit tokens as bank business in the Banking Act and Depositor⁢ Protection Act contribute to banks’ investment in deposit token infrastructure?

⁤ Q: What are the expected effects of digitizing the voucher business through deposit tokens?

Q: What concerns do financial ⁣institutions have regarding the extension​ of financial ⁤services to financially vulnerable groups through deposit⁣ tokens?

2. Implications of CBDC‌ on financial inclusion:

Q:‍ What are the potential benefits and drawbacks⁤ of CBDC adoption⁣ for financial inclusion in ⁤South ‌Korea?

‍ Q: How ⁣can policymakers ensure a cautious approach to financial inclusion while promoting the growth of deposit tokens and ⁢CBDC?

Q: What are the possible risks associated with the exclusion of certain groups from digital financial services due to technological barriers?

Q: How‌ can regulators strike‌ a balance between promoting innovation‌ and protecting consumers’ rights in ‌the deposit token business?