The South Korea Central Bank seems to be a lot in the crypto news lately and today’s again for issuing a warning over central bank digital currencies according to a report from local news outlet Yonhap News Agency.
CBDCs are basically state-backed digital currencies that involve a blockchain-based version of a certain country’s fiat currency by circulating in tandem or totally replacing the paper notes and coins.
South Korea decided against the use of CBDCs while other countries are looking into the possibility of using them. The decision comes after a six-month consultation with the Bank of Korea. The central bank claims that CBDCs can lead to mass withdrawals of funds that will lead to squeezing the liquidity and will push up the interest rates:
“The CBDC is a kind of a BOK-issued bank account. People trust it more than one in a commercial bank. Demand deposits are one of the biggest sources of loans by banks. When people pull out their money, banks raise rates, or lower the reserve ratio, to secure more funds.”
The Bank of Korea has previously stated:
“We have no plans to issue any type of CBDC that is available for all people in the near future. We have to work further on the benefits and costs of CBDC implementation first.”
Seoul decided not to make any major changes to its stance on cryptocurrency in general. However, in other countries such as Switzerland, the Bank of International Settlements provided support where it shows that 70 percent of the central banks worldwide are conducting a CBDC research in some form for 2019.
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“Blockchain technology has established a highly mutual trust data sharing mechanism among tax authorities, invoice service providers, taxpayers and other parties. This is a major reason for the tax authorities to take a new step in deepening the [technological] reform [by] the distribution services.”Back in December 2018, one of the bigger cities in the Guangdong province-Shenzhen announced its success story of how blockchain technology helped with the tax invoices via the messaging app WEChat payment platform. Also, last year in November, the capital of the Guangdong and one of the most developed economic zones in China, Guangzhou, was chosen as a headquarters city for the new blockchain alliance. The alliance involves 54 different companies and is promoting blockchain technology in finances and trading. Countries around the world are opting for blockchain-based tax solutions because of the higher efficiency and transparency.
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