Over the next few years, the central bank of South Korea will be working on a blockchain project that would create a digital version of the won. The project quietly started in February, 2020, but was halted by the coronavirus pandemic that hit South Korea particularly hard and required swift mitigation by public health officials. Although officials at the Bank of Korea have thus far indicated that they do not intend to go live with the digital won anytime soon, some analysts believe that this could change depending on the actions that the People’s Republic of China may take in the near future.
South Korea’s Interest in a Sovereign Cryptocurrency
South Korea is currently one of the friendliest jurisdictions in terms of cryptocurrency adoption and mobile payments. This progressive Asian nation has a particular advantage in the close relationship that the government has forged with consumer electronics giant Samsung, a company that has been seeking to become a leader in the digital wallet segment through its Galaxy line of smartphones. Should the Bank of Korea wish to encourage use of the digital won, it would be safe to assume that regulators would likely count on Samsung to support this initiative.
The World Pays Close Attention to China’s Regulations
In China, the People’s Bank has been hinting that a digital version of the yuan could be forthcoming very soon, and this would certainly change the direction of the cryptocurrency markets. Other countries have already tested sovereign cryptocurrency tokens: Singapore and Russia were pioneers in this regard, and the Eastern Caribbean Currency Union has been conducting a pilot test since last year. Quite a few analysts believe that China is ready to be the first country where a fiat cryptocurrency would be ready for mass circulation shortly after launch, and this would likely prompt other central banks to follow suit very quickly. In this context, we should not be surprised if South Korea decides to speed up its central bank blockchain project.
In the United States, the Federal Reserve and the Treasury did not consider developing a digital version of the greenback until technology giant Facebook announced Project Libra in 2019. Opposition to Project Libra has been swift; American regulators and legislators have expressed strong concerns about Facebook’s ability to manage a token ostensible pegged to the average value of a basket of international currencies. At the same time, a working group associated with the Federal Reserve is researching the potential of an American blockchain supporting a digital version of the greenback, and this seems to be inevitable given how advanced China is in this regard.