As technology continues to evolve at an astonishing pace, the financial sector isn’t staying behind. A significant landmark is the recent announcement by the Bank of Korea about the initiation of a pilot project to carve out the needed infrastructure for a central bank digital currency (CBDC). This move places South Korea among a rapidly swelling club of nations engaged in researching the prospects and challenges linked with CBDCs.
The Bank of Korea’s ambitions mirror those of Denis Beau, the first deputy governor at Banque de France. According to a statement he made on Sept. 3, CBDCs could be the catalyst required for enhancing cross-border payments, thus possibly fueling the establishment of a new international monetary system.
Everything isn’t as rosy and straightforward as it appears at first glance, though. The journey towards the full implementation of CBDCs isn’t necessarily set in stone. The Bank of Korea admits that conducting trials isn’t a guarantee of absolute implementation.
While the CBDC exploration involves private banks and public institutions, with technical expertise sourced from the Bank for International Settlements, the focus will be to scrutinise both retail and wholesale types of CBDC. In the latter case, banks will tokenize their deposits and circulate them within a network closely supervised by the Bank of Korea, the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS).
The flip side of the crypto coin reveals a darker narrative, though. Take the case of Sam Bankman-Fried, the former CEO of the now-defunct crypto exchange FTX. His predicament points to potential pitfalls in the crypto world. Bankman-Fried is currently incarcerated for allegedly misappropriating customer funds and violating his bail conditions.
Despite his legal team’s protestations, the U.S. Department of Justice maintains a firm stand. They argue that the lack of crypto regulations is no barrier to pressing criminal charges. Existing laws already prohibit companies from pilfering customer assets, and that’s the lynchpin of their case against the ex-CEO.
These two scenarios portray a stark contrast in the world of cryptocurrencies. On one hand, the possibilities that CBDCs propose may usher in a technologically advanced era of financial transactions. Conversely, the dark underbelly reveals the high stakes and potential fraud risks that unregulated sections of the crypto world can nurture. This leaves everyone with a crucial question: What will be the definitive balance in the future of digital currencies?
Source: Cointelegraph
