BIS Secretary-General: "Korea's CBDC 'Digital Won'... Aligns with Future Currency System Vision" (Comprehensive)

Agustin Carstens, BIS Secretary General, Visits Korea
Calls "Digital Won" a "Future Monetary System"
Explains No Worries About Big Brother Concerns
"Cash Must Exist Even If CBDC Is Introduced"

Agustin Carstens, General Manager of the Bank for International Settlements (BIS), is delivering the keynote speech at the BIS General Manager Invitation Seminar held at the Conference Hall of the Bank of Korea Annex in Jung-gu, Seoul, on the morning of the 23rd. Photo by Joint Press Corps

Agustin Carstens, Secretary General of the Bank for International Settlements (BIS), on the 23rd referred to the central bank digital currency (CBDC) being researched and developed by the Bank of Korea as the 'Digital Won' and positively evaluated it, saying it "aligns well with the vision of the future monetary system." The Bank of Korea, which is actively promoting real-world experiments with CBDC in cooperation with financial authorities, has already completed trademark registration for the term 'Digital Won' mentioned by Secretary General Carstens.

In a keynote speech at a seminar held at the Bank of Korea's annex conference hall in Jung-gu, Seoul, on the theme of 'CBDC and the Future Monetary System,' Secretary General Carstens stated about the Bank of Korea's CBDC project, "The design structure of the (Digital Won) project is entirely new, including an interworking platform that interacts with the currency ledger, allowing the platform to respond more flexibly and openly to market development."

Since assuming office as BIS Secretary General in 2017, he has expressed strong support for the Bank of Korea, which is proactively advancing its CBDC initiatives, at various international meetings. This visit marks his second trip to Korea and the first in five years since November 2018. Considering that BIS operates mainly with advanced country central banks, this visit indicates that BIS is closely monitoring Korea's CBDC project and intends to further strengthen cooperation between the two sides. Earlier, the Bank of Korea announced plans last month to conduct 'CBDC usability tests' jointly with BIS, making Korea the first country in the world to conduct a CBDC pilot test in collaboration with BIS.

Secretary General Carstens explained, "The Bank of Korea's CBDC project aligns well with the vision of the future monetary system," adding, "At the center of the network is the institutional CBDC, and the regulated banking system participates in the common ledger through tokenized deposits." CBDC, a digital form of currency issued by central banks, is divided into retail and wholesale types depending on the scope of use and users, with this test focusing on the wholesale CBDC.

Lee Chang-yong, Governor of the Bank of Korea, is delivering a welcome speech at the seminar hosted by the Bank for International Settlements (BIS) Secretary General on the morning of the 23rd at the Conference Hall of the Bank of Korea Annex in Jung-gu, Seoul. Photo by Joint Press Corps

The core of the future monetary system mentioned by Secretary General Carstens is the 'integrated ledger' and 'tokenization.' The integrated ledger bundles various transactions related to financial markets and financial services into a programmable common platform, enabling real-time instant settlement and atomic settlement of all assets. Tokenization records money and assets digitally on a programmable ledger, serving as the foundation that operates the integrated ledger.

He emphasized, "From the monetary system perspective, the core of the 'Digital Won' project is technically improved but gives a familiar feeling, while other aspects of the project architecture are entirely new," adding, "This includes an interworking platform that interacts with the currency ledger, enabling the application of various use cases and allowing the platform to respond more flexibly and openly to market development."

In particular, he attributed significance not only to the design and technical sophistication of the 'Digital Won' project but also to the collaborative relationships during its execution. He said, "This project involves the Bank of Korea as well as major domestic regulatory agencies such as the Financial Services Commission and the Financial Supervisory Service, and legal issues have already been resolved or are being addressed," adding, "Such a collaborative approach is very important to realize visions like the integrated ledger."

Secretary General Carstens mentioned that building a future financial system requires tokenized central bank money, i.e., wholesale CBDC, and tokenized commercial bank deposits. Although individuals may not feel much difference as they will still save and transact through bank accounts even if wholesale CBDC is introduced, the time delays caused by transactions through third-party intermediaries will disappear, and convenience will increase by enabling purchases of stocks and financial assets without additional costs.

He added, "Tokenizing the monetary system is just the beginning. To fully leverage the benefits of new technologies applied to everyday financial transactions, we need to set bolder and broader goals," emphasizing, "In particular, we should aim to tokenize claims on other financial and real assets such as government bonds, stocks, or real estate registries beyond tokenized currency."

Bank of Korea Governor Lee Chang-yong and Agustin Carstens, General Manager of the Bank for International Settlements (BIS), are having a discussion on central bank digital currency (CBDC) and the future monetary system at the Conference Hall of the Bank of Korea Annex in Jung-gu, Seoul, on the morning of the 23rd. Photo by Joint Press Corps

Meanwhile, the Bank of Korea plans to accelerate the CBDC usability tests following Secretary General Carstens' visit. The Bank of Korea completed trademark registration for CBDC name candidates, including 'Digital Won,' last August, and plans to involve not only banks and financial institutions but also general financial consumers in the experiments by the end of next year. In a dialogue with Secretary General Carstens on the day, Bank of Korea Governor Lee Chang-yong said, "He named it 'Digital Won,'" adding, "We had been looking for a good name for a long time, and it seems to be fixed now."

In response to Governor Lee's question about "why CBDC is important from the general public's perspective," Secretary General Carstens replied, "Central banks have an obligation to provide cash in digital form to society." He emphasized, "Cash uses very old technology, but society is changing rapidly, and wholesale CBDC has much room for technological advancement."

Regarding concerns that issuing CBDC would allow central banks to thoroughly monitor individuals' financial transaction details, he said, "Central banks are not interested in analyzing such information," adding, "Central banks have a 300-year history but have never used such data and have no need to do so. Changing the form of currency does not mean central banks will change their stance."

However, Secretary General Carstens predicted that cash will still be used even after CBDC is introduced. He said, "Even if CBDC is developed, cash should not be eliminated," adding, "Of course, handling cash is costly, but cash must definitely exist."