South Korea's central bank: Bitcoin cannot replace legal tender, but can be used as an investment
Foreword:
Foreword:
This article introduces the news that the Bank of Korea recently announced that Bitcoin cannot replace legal tender, but its popularity as an investment method continues to increase. (This article has a total of 1564 words, and the reading time is about 4 minutes)"Recently, the financial sectors of various countries have introduced new digital transformation technologies such as big data, cloud computing, artificial intelligence, and blockchain, and new financial innovations have emerged. However, the Bank of Korea said that it is unlikely that encrypted assets such as Bitcoin will be as common in the market as legal tender (a currency whose value is guaranteed by law), but will continue to receive attention as an investment tool. The Bank of Korea recently made the above statement in a report titled "Overseas Economic Focus-Possibility of Financial Sector Model Transformation Brought by Digital Innovation." The Bank of Korea explained in the report:"As people's attention to encrypted assets increases and investment surges, the financial ecosystem is rapidly transforming based on encryption technology.
Some people have also raised the possibility of encrypted assets replacing legal tender. They argue that encrypted assets, as a means of exchange and value storage, can perform functions such as legal tender. Encrypted assets are easy to carry or pay with digital devices. In cross-border transactions, there is no need to go through exchange procedures, so transaction costs can be saved. “Distributed ledger” technology also reduces operational risk by distributing data to multiple institutions without the need for a central administrator. Due to the limited circulation of encrypted assets, they are considered to be an inflation hedge instead of gold, a traditional safe asset. In an environment where digital commerce transactions are pervasive, cryptocurrencies can be viewed as"digital gold"。
digital gold"Nevertheless, Bloomberg and other foreign media reported that the possibility of encrypted assets competing with fiat currencies and being universal is very low. The American financial magazine "Barron's Weekly" also pointed out that encrypted assets have no use value or legal force, based on people's perception of"A future currency suitable for the digital economy"Investors are eager to invest in anticipation, but this is the fundamental limitation. In other words, the price of cryptocurrency is very likely to rise and fall sharply, so its role as a currency payment settlement and value store is limited. In June, the Bank for International Settlements (BIS) pointed out the limitations of crypto assets. According to analysis, due to the characteristics of cross-border anonymous transactions, cryptocurrency transactions may be related to illegal activities such as tax evasion, money laundering, and terrorist organization financing. Therefore, the larger the scale of cryptocurrency transactions, the governments of various countries will strengthen relevant restrictions. However, the Bank of Korea predicts:"。
Regarding DeFi, a decentralized financial service based on blockchain technology, the Bank of Korea predicts that the transaction method through the intermediary of financial companies will continue to be maintained in the short term, but as the digital economy spreads, the role of DeFi may continue to expand. . At the same time, the Bank of Korea also predicted that the transformation of the financial sector model brought about by the new technology of digital transformation and financial innovation will have a huge impact on consumers, central banks, and supervisory agencies.
Conclusion:
Conclusion:
The circulation of cryptocurrency is limited, which effectively prevents inflation, and because of its scarcity, it can be used as a means of investment. Although cryptocurrencies can also function as traditional currencies, such as payment and purchase of goods and services, the nature of cryptocurrencies and fiat currencies is different. The legal currency is backed by the national reputation, and at the same time closely follows the supervision of monetary policy and various laws and regulations. The government will not let the legal currency grow freely. Therefore, the issue of whether cryptocurrencies can replace fiat currencies depends on the views of governments of various countries on cryptocurrencies in the future.
