South Korean private banks, Hana Bank and Woori Bank, are reportedly exploring the possibilities offered by tokenized deposit technology as a viable alternative to both private stablecoins and Central Bank Digital Currencies (CBDCs).
Both banks are actively studying the concept of “certificate of deposit” tokens (CDs), which involves the conversion of traditional bank deposits into digital tokens on the blockchain.
These tokenized bank deposits can seamlessly replace conventional notes and deposits without causing any disruptions to the existing banking system. To ensure security and compliance, the identity verification process for tokenized deposits adheres to the same high standards as any traditional bank service.
On July 23, 2023, Woori Bank also published a report on CD tokens through its research division, furthering its investigation into the technology.
Similarly, local media reported that Hana Bank chose to research CD tokens as part of its involvement in the proof of concept program for the CBDC project led by the Bank of Korea.
Meanwhile, in July 2023, the Bank of Korea made public its active efforts to prepare for the possible implementation of a Central Bank Digital Currency (CBDC). These preparations encompassed a thorough exploration of various features, including the integration of smart contracts, facilitating offline payments through near-field communications, and enabling seamless cross-border transactions.
Currently, a pilot programme in collaboration with 14 private banks is already operational. The system has handled an impressive 2,000 transactions per second, surpassing the capacity of many domestic payment systems.
However, a slowdown occurred as the system neared its maximum capacity, indicating the need for further enhancements. As a result, the Bank of Korea is now focused on identifying and implementing measures to bolster the technical capabilities of the CBDC project for optimal performance and efficiency.
With Hana Bank and Woori Bank actively exploring tokenized deposit technology and the Bank of Korea making strides in its CBDC programme, the future of digital currencies in South Korea appears promising as the country continues to embrace innovative financial solutions.
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