The Bank of Korea (BOK) has published the results of its research last year on legal issues related to Central Bank Digital Currencies (CBDCs).
The study concludes that a CBDC would meet the requirements of currency legislation and could be freely exchanged for cash as both have the same legal status. Therefore, it would be sensible to treat a CBDC in the same way as cash deposits from financial institutions, CoinDesk Korea reported on Monday.
It is for this reason that it is proposed that BOK, the country’s central bank, have the legal basis for applying positive or negative interest rates to a future CBDC. It must also be decided whether the BOK would exchange the CBDC directly or through an intermediary for cash from consumers.
Given how a CBDC would fit into South Korea’s existing legal framework, the research suggests that it is not subject to the Financial Transactions Act as a CBDC issuance is based on the monetary authority and not on profit.
However, the investigation emphasizes that the Bank of Korea law would need to be amended to allow the issuance of digital currency, as the law currently only covers banknotes and coins.
The comparison with virtual assets such as cryptocurrencies is difficult, according to research, because a CBDC has “a clear issuer”, the central bank, and is based on the exclusive authority of this issuer. This is different from virtual assets, which are known as digital certificates with economic value and which can be traded or transferred electronically.
Since the CBDC is not considered property, the law cannot establish crimes such as theft, embezzlement, or stolen property. However, given that electronic records are defined as items of property, it would be possible to apply laws relating to robbery, fraud, intimidation and damage.
