Private Banks in South Korea, including Hana Bank and Woori Bank, are exploring the potential of tokenized deposit technology, known as “certificate of deposit” tokens (CDs). CDs are digital representations of bank deposits placed on the blockchain, offering an alternative to private stablecoins and central bank digital currencies (CBDCs) without disrupting the existing banking system. These tokenized deposits require identity verification similar to traditional bank services.
The interest in CDs by the banks arises from concerns raised by stablecoin failures in 2022, prompting financial regulators to seek more stable solutions. CDs are perceived as stable and relatively similar to the current banking system from the banks’ perspective.
Furthermore, CDs have the potential to be compatible with CBDCs, and both Hana Bank and Woori Bank are participating in a proof-of-concept test for a CBDC conducted by the Bank of Korea. The central bank has been preparing for the potential introduction of a CBDC, exploring various aspects, including smart contracts, offline payments with near-field communications, and cross-border payments.
The pilot program involving 14 private banks is currently operational, but technical issues have been identified. The system’s capacity reached a slowdown after handling 2,000 transactions per second, which is higher than most domestic payment systems. The Bank of Korea is actively working to improve the technical capabilities of the project.
Get $200 Free Bitcoins every hour! No Deposit No Credit Card required. Sign Up