Bank of Korea Governor Lee Ju-yeol said that when central bank digital currencies (CBDCs) are introduced, the demand for existing cryptocurrencies, such as bitcoin, will decrease.
Lee’s comments on the sustainability of the cryptocurrency came at an event on Wednesday, Park Geun-mo reported to CoinDesk Korea.
“When the digital currency issued by the central bank is introduced, the demand for bitcoin 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 on how it works as a means of payment or reserve of value.
Lee’s comments come as the Bank of Korea prepares to test its own CBDC later this year. A number of countries around the world, including China, Russia, Turkey and Jamaica, have announced possible CBDC pilots in 2021.
In South Korea’s pilot, the bank plans to test the CBDC for funds transfers, payments, issuance, distribution and redemption, according to CoinDesk Korea.
The Bank of Korea also published a survey on a national digital currency in February, which concluded that CBDCs are like fiat currency and will meet legal tender requirements, as opposed to privately issued cryptocurrencies.
At Wednesday’s event, Lee added: “Before the circulation of a CBDC, there is a need for an inspection of technological 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 by the Bank for International Settlements (BIS). Speaking at a Basel conference on virtual payments, Powell said that a CBDC will need to “coexist with cash and other types of money in an innovative and flexible payment system”.
Lee had to answer other questions about virtual currencies because of the bitcoin price race and the next pilot from South Korea’s CBDC.
Last month, speaking to the National Assembly, 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 is better to follow the US path and do it right than fast.