Bank of Korea's Digital Currency Development Two Years Ahead of Europe

The digital currency being developed by the Bank of Korea (BOK) is evaluated to be two years ahead of major European countries. Bank of Korea Governor Rhee Chang-yong shared the BOK's advanced technological prowess by introducing a future currency system utilizing 'unified ledger' technology at a European Central Bank (ECB) forum.

This unified ledger system integrates previously separate messaging, clearing, and settlement procedures into one. Asset and payment transactions, as well as multiple payment transactions, which were processed individually, are bundled into a single transaction for immediate and simultaneous processing. Final settlement is made with central bank money, preserving the unity of currency.

Governor Rhee pointed out the structural limitations of private payment tokens, or stablecoins, noting that their value fluctuates when the issuer's credibility is shaken, and they are treated as different currencies depending on the blockchain.

The Bank of Korea plans to commence the second phase of Project Hangang in the latter half of this year. In the second phase, the BOK intends to utilize the digital currency system's functions for treasury fund execution, electric vehicle charging subsidy payments, and public sector operating expense disbursements.

Governor Rhee suggested the need to explore ways to link the unified ledger with 'Project Agora,' led by the Bank for International Settlements (BIS), to facilitate cross-border payments. This could reduce foreign exchange and securities settlement costs and enhance the international usability of the Korean won.

Governor Rhee stated that directly issuing and circulating government bonds within the digital currency system could automate processes from real-time confirmation of collateral assets to maturity repayment through smart contracts. This would improve the precision and responsiveness of monetary policy execution, contribute to financial system stability, and support the central bank in fulfilling its duties.