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Several private banks in South Korea are studying the potential of tokenized deposit technology, an alternative to both private stablecoins and central bank digital currencies (CBDCs).
According to a report from Maeli Business News Korea, Hana Bank and Woori Bank — both private enterprises with headquarters in Seoul — showed interest in so-called “certificate of deposit” tokens (CDs). CDs are tokenized bank deposits put on the blockchain, replacing customary notes and deposits without disrupting the existing banking system. CDs also require identity verification of the same standards as any traditional bank service.
Hana Bank plans to research CD tokens, while Woori Bank’s research department has recently released a report on the tokens.
From the bankers’ perspective, it seems CDs have few disadvantages. As the report specifies, the interest in them stems from the anxiety that the stablecoin failures of 2022 raised among the financial regulators. According to anonymous senior bankers cited in the report:
“CD tokens are perceived as stable from the banks’ perspective since they do not differ significantly from the current system.”
Another important feature is CDs’ potential compatibility with CBDCs. Both of the banks mentioned above are participating in the proof-of-concept test for a CBDC by the Bank of Korea.
Related: South Korean Shinhan Bank completes stablecoin remittance pilot with Asian partners
In July, the Bank of Korea revealed its ongoing preparation for the potential introduction of a CBDC, which included investigating the use of smart contracts, offline payments with near-field communications and cross-border payments.
The pilot program with 14 private banks is already functioning. However, there are still some technical issues; the system, which has been managing to handle 2,000 transactions per second — higher than most domestic payment systems can facilitate — slowed down as it reached capacity. The Bank of Korea is now looking into ways to improve the technical capacities of the project.
Magazine: South Korea’s unique and amazing crypto universe
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