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BOK doubtful about Bitcoin as future means of exchange

2013/12/27 14:20

SEOUL, Dec. 27 (Yonhap) -- South Korea's central bank said Friday it is highly doubtful that virtual money Bitcoin could grow into an alternative payment tool due to its vulnerability to hacking attacks and price volatility.

"There have been no security measures although the number of online hacking on Bitcoin users and exchanges is on the rise," a report by the Bank of Korea (BOK) said, also citing its limited acceptability.

While Bitcoin is seen as having merits in terms of efficiency and convenience in payment and settlement, it is very unclear that it could develop into a formal tool of payment, the report said, adding the government needs to draw up regulations on Bitcoin as transactions of the money can be exposed to risks of hacking attacks and money laundering.

Bitcoin, exchangeable online via peer-to-peer payment networks, was invented in the aftermath of the global financial crisis by pseudonymous computer developer Satoshi Nakamoto. It earned attention after the Federal Reserve Chairman Ben Bernanke said it may hold long-term promise as a possible means of exchange in the future.

The BOK report echoed similar remarks made by the central bank's Gov. Kim Choong-soo who earlier this month said it was difficult to talk about the future of Bitcoin but questioned whether it could develop into a non-legal tender.

The value of Bitcoin has undergone high fluctuations recently in tandem with assessments on the virtual money made by central banks around the globe.

The price of Bitcoin was valued at US$0.05 in January 2011, but it shot up to $1,200 in November before tumbling to around $600 amid central banks' caution against the virtual money.

France's central bank has warned against the use of Bitcoin, saying that its value is highly volatile and that the virtual money is not regulated by authorities. China has also banned financial institutions from trading Bitcoin as the computer-generated money carries risks.

The Korean government, the central bank and the financial watchdog have said they would closely monitor possible money laundering and violations of real name transactions using Bitcoin since it is not seen as meeting the criteria of legitimate financial products.

A Paris Baguette bakery in Incheon, west of Seoul, became the first off-line business to accept Bitcoin in South Korea earlier this month.



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