With bitcoin (BTC) and altcoins set to “replace legal currencies” in the future, South Korea’s central bank, the Bank of Korea (BOK), has issued a surprisingly crypto-friendly assessment.
There were also some encouraging remarks for stablecoin developers and enthusiasts of decentralised finance (DeFi).
On August 8, the BOK issued a paper titled “The Possibility of a Paradigm Shift in the Financial Sector Caused by Digital Innovation” (literal translation).
The BOK’s researchers forecasted in the paper that cryptoassets would continue to be of interest to the private sector in the future, where it would operate as a “investment and speculative” vehicle, and concluded that BTC and the like would probably not completely replace fiat in the future, primarily due to volatility concerns.
The authors predicted that crypto would continue to see more “limited-purpose” adoption in the private sector, where its functionality would grow independently of fiat currency.
Per SBS and the Segye Ilbo, the BOK report authors wrote,
“The concern is whether or not private cryptographic assets such as bitcoin can replace the role of legal currency in the future.”
They used a familiar argument to claim that digital assets could become a type of “digital gold,” gaining widespread acceptability as a hedge against inflation.
The writers wrote on the function of stablecoins:
“Among cryptoassets, stablecoins, which are designed to maintain a stable value by pegging to fiat currency will have a high potential for use in cryptoasset ecosystems, virtual worlds and metaverses, as well as cross-border remittance scenarios.”
The study is not a policy document, but it does represent the views of at least some of the BOK’s staff.
The authors also mentioned the increased interest in DeFi, an industrial sector they claim is on the rise, stating that while traditional financial institutions will continue to be most people’s go-to resource for “general transactions,” the role of DeFi, which is more specialised, “can continue to grow.”