Bank of Korea researching stablecoins, alternatives to CBDC
Several private banks in South Korea are studying the potential of token deposit technology, an alternative to private stablecoins and central bank digital currencies (CBDC).
According to according to a report from Maeli Business News Korea, Hana Bank and Woori Bank — both private companies with headquarters in Seoul — are showing interest in so-called token (CD) “certificates of deposit.” CDs are tokenized bank deposits placed on the blockchain, replacing regular notes and deposits without disrupting the existing banking system. CDs also require identity verification to the same standards as any traditional bank service.
Hana Bank plans to research CD tokens, while Woori Bank’s research department recently released a report on tokens.
From the bankers’ point of view, it seems that the CD has some drawbacks. As the report specifies, interest in them stems from concerns that stablecoin failures of 2022 are increasing among financial regulators. According to the anonymous senior banker, cited by the report:
“CD tokens are considered stable from a bank’s perspective as they do not differ significantly from the current system.”
Another notable feature is potential CD compatibility with CBDCs. The two banks mentioned above participated in the proof-of-concept test for CBDC by the Bank of Korea.
Related: South Korea’s Shinhan Bank completes stablecoin remittance trial with Asian partner
In July, the Bank of Korea disclosed its ongoing preparations for a possible introduction of CBDCs, including investigating the use of smart contracts, offline payments with near-field communication, and cross-border payments.
A pilot program with 14 private banks is already underway. However, there were still some technical issues — the system, which already managed to handle 2,000 transactions per second, more than most domestic payment systems could facilitate, slowed down when it reached capacity. The Bank of Korea is now exploring ways to increase the technical capacity of its projects.
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