South Korea’s central bank governor said on Friday introducing a central bank digital currency (CBDC) is now an urgent task for central banks as so-called stablecoins pose challenges to monetary policy.
“The proliferation of stablecoins, such as USDT and USDC, poses new challenges to central banking operations,” Rhee Chang-yong, governor of the Bank of Korea, said at a conference in Seoul on digital currencies. Rhee said their widespread adoption could impair the effectiveness of monetary policy and raise concerns about financial stability, adding “despite their name, stablecoins often lack stability.” “This underscores the urgency for central banks to consider introducing CBDCs, whether retail or wholesale.”
Stablecoins are a form of cryptocurrency backed by an asset or fiat currency. They have surged in popularity but their weaknesses were highlighted last year by the spectacular collapse of TerraUSD and its sister coin Luna. In October, the Bank of Korea launched a project to develop a wholesale CBDC, in cooperation with the Bank for International Settlements (BIS), often dubbed the central bankers’ central bank.
