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| A pedestrian passes by an office of the nation's largest cryptocurrency exchange, Bithumb, in Seoul in this file photo taken on Dec. 8, 2019. Yonhap |
Absence of legal guidelines blocks lenders from expanding digital foothold
By Lee Min-hyung
Korean commercial lenders' drive to issue their own digital currencies remains at an impasse, as the absence of legal guidelines prevents them from joining the global banking bandwagon, officials in the industry said Wednesday.
They note that lenders are ready to embrace the global banking paradigm shift represented by the recent rise of virus-induced contactless transactions. But no actual progress can be made toward the move due to the lack of a legal basis in doing digital currency business here.
This does not allow them to take practical and preemptive steps in making aggressive inroads into the emerging area, they said.
Korean commercial lenders' drive to possibly issue their own digital currencies remains stalled, as the absence of legal guidelines prevents them from joining the global banking bandwagon, industry sources said Thursday.
In March, the National Assembly passed a revision bill on special financial transactions ― including details on virtual currency transactions ― and this will take effect March 1, 2021. A draft guideline of the revision will be unveiled sometime in the latter half of 2020 possibly around September.
Until then, however, commercial banks here have to wait to build specific plans toward their digital currency vision, officials from major lenders here said.
"We are closely watching the digital currency drive taken by overseas lenders, but no Korean lenders can expand their foothold in the emerging financial trend, as detailed guidelines over the revision bill have not been fixed so far," an official from one of the nation's major commercial banks said.
"Most banking players here have no choice but to enhance their research capabilities in the area," the official said. "We expect the financial authorities to share guidelines over the bill sometime around September this year, until then, all the lenders here can do is simply pay attention to any movement from our overseas counterparts, rather than taking more practical steps."
This is in contrast to other Asian economic powerhouses ― such as China and Japan ― which are speeding up their efforts to brace for the introduction of digital currencies.
According to Japanese media outlets, the country's leading commercial lenders ― Mitsubishi UFJ Financial Group and Mizuho Bank ― are in talks to link their digital currencies with mobile payment services.
The discussions are still underway, but the latest steps by the Japanese players display their willingness to stay ahead in the possible digital banking paradigm shift. The Bank of Japan, which previously denied the likelihood of issuing a central bank digital currency (CBDC), changed its stance and is engaging in research in the area.
Things are a lot more aggressive in China which aims to become Asia's leading digital currency issuer.
The People's Bank of China started digital currency research in 2014 ― the first central bank to do so. In 2017, the bank established a digital currency research laboratory.
Starting this year, the Bank of Korea (BOK) has identified a CBDC as one of the most crucial areas for its mid-term growth in line with the global banking trend.
It is natural for local commercial lenders to continue falling behind the global banking trend at a time when the central bank does not take "very specific" CBDC drives like that in China, another official from a major lender said.
"It is problematic for local lenders to make inroads into a digital currency before the government does," the official said.
The financial industry is a heavy-regulated sector, so it is crucial for the government or BOK to unveil more detailed plans on any CBDC, he said. It is only after then that banks here can take more progressive steps in expanding their digital presence and compete with overseas players he added.
