Bank of Korea Governor Lee Ju-yeol said that when central bank digital currencies (CBDC) are introduced, the demand for existing cryptocurrencies like bitcoin will wane.
Lee’s comments on the sustainability of the cryptocurrency came at an event on Wednesday, Park Geun-mo reported for CoinDesk Korea.
“When the digital currency issued by the central bank is introduced, the demand for bitcoins and other cryptocurrencies as a means of payment will decrease,” said Lee.
He also said that bitcoin and other crypto assets have high price volatility and therefore there are limitations as to how well they can function as a means of payment or as a store of value.
Lee’s comments come as the Bank of Korea prepares to pilot its own CBDC later this year. Several countries around the world, including China, Russia, Turkey, and Jamaica, have announced potential CBDC pilots in 2021.
In the South Korean pilot, the bank plans to test CBDC for fund transfers, payments, issuance, distribution and redemption, according to CoinDesk Korea.
The Bank of Korea also released an investigation into a national digital currency in February, which concluded that CBDCs are like fiat currency and will meet legal tender requirements, unlike privately issued cryptocurrencies.
At Wednesday’s event, Lee added: “Prior to the circulation of a CBDC, it is necessary to conduct an inspection of technology requirements and an in-depth examination of the impact of a CBDC on the financial system.”
Last week, US Federal Reserve Chairman Jerome Powell made a similar comment, referring to a report from the Bank for International Settlements (BIS). At a Basel conference on virtual payments, Powell said that a CBDC should “coexist with cash and other types of money in an innovative and flexible payment system.”
Lee has had to answer other questions about virtual currencies due to the bitcoin price race and South Korea’s upcoming CBDC pilot.
Speaking to the National Assembly last month, Lee said that cryptocurrencies like bitcoin “have no intrinsic value.” At a later event, Lee also said that when it comes to a CBDC, it’s better to go the US way and get it right rather than fast.