The Bank of Korea, South Korea’s central bank, has recently stated that the emergence of cryptocurrency such as bitcoin and Ethereum will bring a coin-free society one step closer.

Inefficiency of Bank Accounts

For more than a decade, the South Korean government, its central bank, and the financial services commission (FSC) have been investigating into possible methods that could be employed to eliminate coins from the South Korean economy and society. The bulkiness, weight, and expensive costs of coins make them an inefficient form of money in general, the government explained.

Since coins are expensive to create and the materials used to make coins like bronze cost more than the coins themselves, increasing cases of illicit transformation of coins into bronze and supplying it to local businesses have been reported to the police. As such, the government has continued to study ways to eliminate coins from the society and replace them with fiat money.

For awhile, the Bank of Korea attempted to remove coins by requesting merchants, stores, and retailers to automatically send small amounts of money left over as change to the bank accounts of consumers. The issue with this method, after months of experimentation, was the inefficiency of bank settlement and the fact that many underaged teeneagers and college students do not have bank accounts.

A few years ago, virtually everyone in South Korea was equipped with a bank account, because it was easy to create bank accounts with local banks. However, as illicit businesses began to utilize individual bank accounts to finance criminal operations and launder money, the Bank of Korea asked banks to restrict the issuance of bank accounts and prevent from opening accounts for citizens without a stable source of revenue, job, and property.

Utilization of Blockchain Technology

In 2017, the Bank of Korea official began the development of various technologies that could allow the country to eliminate coins in the short-term, ideally by 2020.

On April 30, after nearly a year of research, the Bank of Korea announced that they have started to extensively investigate the possibility of utilizing blockchain technology and cryptocurrency, and has also cooperated with central banks in Asia and Europe to evaluate the applicability of the blockchain.

The Bank of Korea has already formed a task force specifically tasked to research cryptocurrency and blockchain technology, and will continue to study the technologies behind cryptocurrencies like bitcoin and Ethereum.

Already, Park Won-soon, the mayor of South Korea’s capital Seoul, said that the government of Seoul is investigating ways to utilize the blockchain to improve existing infrastructures such as public transportation systems and the payout system for teenagers.

In the mid to long-term, analysts expect the government of South Korea to continue utilizing the blockchain and cryptocurrency to power public infrastructures and financial systems.

With the congress considering the possibility of lifting the current ban on domestic initial coin offerings (ICOs) and the government’s practical regulations for exchanges, both investors and businesses in the cryptocurrency industry remain highly optimistic about the growth of the blockchain sector of South Korea.