South Korea’s Central Bank (BOK) has published the Payment and Settlement Systems Report for 2022. The supervision of the systems has been successfully implemented, the report says He saidshe prepares for the future with central bank digital currency (CBDC) and discusses stablecoin regulation broadly.
The report said that the BOK-Wire + rapid payment system will be upgraded to real-time gross settlement (RTGS) and adopted the ISO 20022 standard, which is expected to be implemented in 2028. The bank will also work to increase supervision of “Big Tech” payment services and build its capabilities to respond to “IT operational risks”.
The Bank of Korea continued to prepare for a possible introduction of the central bank, which included investigations into the use of smart contracts, offline payments with near field communication and cross-border payments. The bank connected 14 banks and the Korea Financial Communications and Clearing Institute (KFTCI) to its CBDC simulation system for the second half of the year to verify its operation.
In line with these international trends, future Korean regulations for crypto assets could also include a separate set of rules for stablecoins.
Stricter rules should apply to stablecoin issuers and related service providers regarding entry regulations, such as… pic.twitter.com/czbhJAvqaY
– Joshua Rosenberg (@_jrosenberg) July 19, 2023
The system handles 2,000 transactions per second. The report indicated that this number is higher than most local payment systems, but it slowed down as it reached its capacity, so more improvements are needed.
The bank attempted to scan CBDC transactions using a no-knowledge proof protocol to improve their privacy. This allowed it to hide wallet addresses and the payment amount for the transaction, but it significantly slowed processing speed and zkCBDC’s security implications were not investigated. She said she might consider isomorphic encryption, too.
Related: CBDCs Must Protect Privacy, Not a Tool for Surveillance: Former CFTC Chairman
The BoK will ramp up CBDC research, with plans to look into CBDC-based token deposits and expand research with banks and KFTCI. He Said:
“The main focus of the Bank of Korea’s research will be to define an operating model for central bank digital currencies with minimal negative impacts on the stability of the financial system and the effectiveness of monetary policy.”
The report indicated that “significant” progress has been made towards regulating crypto assets in the country with the introduction of the Framework Law on Digital Assets Law, but the regulatory framework is still too incomplete to allow payments in cryptocurrencies. The bank has repeatedly stated that the bank is also involved in discussions about a stablecoin.
The Journal: The Unique and Amazing World of Cryptography in South Korea