South Korean Banks Pursue Tokenised Deposits as Stablecoin Alternatives
South Korean private banks are actively researching tokenised deposit technology as an alternative to stablecoins and central bank digital currencies (CBDCs).
The top banks in the region are interested in certificates of deposit (CDs) tokens – tokenised bank deposits on the blockchain.
Hana Bank and Woori Bank, both based in Seoul, are particularly keen on exploring such tokenised CDs.
Hana Bank plans to conduct research on tokenised CDs, while Woori Bank's research department has already released a report focusing on these tokens.
Both banks are also exploring stablecoins, but they approach the concept with a modern perspective, aiming to overcome potential disadvantages associated with traditional stablecoins.
They view tokenised money as a promising alternative to both CBDCs and stablecoins.
Since their conception, CDs have served as a modern alternative to paper-based notes and deposits without disrupting the existing banking system.
They adhere to rigorous identity verification standards similar to traditional bank services.
In Woori Bank's report on deposit tokens and CBDCs, tokenised CDs were perceived as stable from the bankers' perspective because they align closely with the current banking system.
The banks are actively participating in a proof-of-concept test for a CBDC conducted by the Bank of Korea.
The interest in tokenised CDs has grown due to concerns arising from stablecoin failures observed in 2022.
The Bank of Korea has been actively preparing for a potential CBDC introduction, exploring various aspects such as smart contracts, offline payments, and cross-border transactions.
The pilot program involving 14 private banks is operational, but there have been technical challenges when nearing system limits - that is, 2,000 transactions per second.
The Bank of Korea is focusing on enhancing the project's technical capabilities for future implementations.