South Korea’s KEB Hana Bank is collaborating with the central Bank of Korea (BOK) on the BOK’s Central Bank Digital Currency (CBDC) pilot project. Hana Bank is actively participating in the BOK’s CBDC Proof of Concept project and is involved in the preparation of a currency system based on blockchain technology. The bank is also conducting internal research on tokenized deposits.
Central banks have been looking at popular stablecoins as inspiration for their own CBDC projects. However, they are aiming to improve the design of conventional stablecoins, which they label as “private tokenized monies that circulate as bearer instruments.” This comes after De Blasis et al demonstrated that stablecoins like USDT, which is pegged to the US dollar, can experience price volatility.
To mitigate volatility, central banks are exploring tokenized deposits as an alternative to stablecoins. Tokenized deposits settle in central bank money and are more conducive to singleness, according to the Bank for International Settlements (BIS). The BIS published a paper in April discussing the potential of tokenized deposits to displace stablecoins in the financial and banking sectors.
KEB Hana Bank has been involved in the blockchain space for around five years, exploring areas such as blockchain-powered real estate and investing in crypto sector-related research. The BOK has been working with commercial banking partners on the digital Korean won (KRW) project.
The South Korean commercial banking sector is expressing interest in tokenized deposits, which are becoming an emerging hot topic. The Woori Financial Management Research Institute, a rival of Hana Bank, recently published a report on tokenized deposits. Domestic commercial banks have shown great interest in these tokens since BOK Governor Lee Chang-yong emphasized their importance in the banking industry.
Hana’s Management Research Institute predicts that the domestic security token market will reach approximately $27 billion next year.