Digital Currency Should Be Market-Driven, with Competition and Choice

Right now, the entire world stands at the doorway of a “digital currency system.” But depending on whose hand opens that door, the landscape inside can look completely different. If the central bank opens it, what emerges is a system of control; if the private sector leads, what opens is a system of competition and choice.

Recently, while the Bank of Korea’s CBDC (central bank digital currency) experiment has been temporarily suspended, private stablecoins have been rapidly filling the gap. The government is now moving to institutionalize privately issued digital currencies, and the financial sector has already entered a race to claim branding leadership for a “KRW stablecoin.” However, the Bank of Korea is drawing a line against private issuance on the grounds of preserving the effectiveness of monetary policy. In other words, it is clinging to the premise that “only the state can design money.”

The Bank of Korea presents circumvention of capital regulations and the neutralization of monetary policy as arguments against the issuance of private stablecoins. But let us reframe the question. Has central bank monetary policy always been right? The 2008 financial crisis, the 2020 pandemic stimulus measures, the 2022 high-interest-rate shock. At none of these moments was monetary policy perfect, nor did its forecasts succeed.

There is no basis for claiming that digitally designed private currency is inferior to government-issued currency. On the contrary, the private sector has evolved on its own to meet new demands such as global remittances, real-time payments, and blockchain finance. Governments have created regulations in an attempt to catch up with innovation, and even then have often raised their hands too late. The United States abandoned CBDC and chose to institutionalize stablecoins. Why? Because innovation does not originate at the center.

Money is the result of trust, not the result of authority. Money is not created by law alone. It becomes “money” only when it circulates in the market and people trust it. This is where the essence of stablecoins lies. Through blockchain technology, they ensure collateral-based value linkage, and through user experience and distribution networks, they create real demand. By contrast, CBDCs offer only one claim: that people should trust them simply because they are issued by the state.

The market looks not to government credibility, but to performance and transparency. The United States’ “GENIUS Act” institutionalized this principle. Reserve requirements, issuance standards, disclosure obligations: it provided institutional assurance that private money, too, can be trusted under sufficient conditions. Blocking competition itself in the name of monetary policy ultimately amounts to taking away consumers’ freedom of choice.

The potential of free-market money is already being proven. Dollar-based stablecoins are becoming the de facto standard in the global payments market. Tether (USDT), Circle (USDC), and PayPal USD (PYUSD) process billions of dollars in transactions each day and have already become part of the financial system. By contrast, most CBDCs have failed to move beyond the laboratory stage. In terms of technical sophistication, scalability, innovation, and flexibility, the private sector holds the advantage across the board.

The Bank of Korea worries that “if non-banks issue them, capital regulations can be circumvented,” but should we not ask whether those regulations themselves are running counter to the market? In the end, regulation should serve as a referee for competition, not as a shield for the monopoly of a particular actor.

The market, not the state, should be able to design money. It is time to abandon the fixed idea that only money designed by the central bank is “real.” In the digital age, money should exist not in a single form, but as multiple options. That is also a basic principle of a liberal market economy.

If CBDCs are necessary, they should function as a complement in the public sphere. Stablecoins, by contrast, should be allowed the freedom of private competition and experimentation. Which of the two survives should be decided not by the government, but by the market. The government’s role is not to restrict the options, but to establish the conditions and ensure fairness in competition.

Now, even money should be something people can choose. The government still asks, “Do stablecoins not undermine monetary sovereignty?” But we respond with a question of our own: true sovereignty lies not in who prints the money, but in who gets to choose it.

What is needed now is not the central bank’s interpretation, but a framework in which market participants are allowed to experiment. CBDCs may be a tool of monetary policy, but they are not the language of market innovation. Innovation always begins with freedom. There is no reason money should be any different.

Sijin Kim, Researcher, Center for Free Enterprise (CFE)

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Original title: 디지털 화폐, 시장이 이끌며 경쟁과 선택 시스템으로 가야

Author: Si-jin Kim

Date: 2025-08-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=27985