Several private banks in South Korea are studying the potential of token deposit technology, which is an alternative to both private stable coins and central bank digital currencies (CBDCs).
According to reports From Maily Business News Korea, Hana Bank and Woori Bank, both private companies headquartered in Seoul, expressed interest in so-called “certificate of deposit” tokens (CDs). Basically, CDs are tokenized bank deposits, which are kept on the blockchain. They can replace traditional notes and deposits without disrupting the existing banking system. And, of course, CDs require identity verification on the same standards as any traditional banking service.
Hana Bank plans to conduct research on CD tokens, while Woori Bank’s research department recently launched one reports On them.
From a banker’s perspective, CDs appear to have some downsides. As noted in the report, interest in this has been generated by fears of stablecoin failures in 2022 among financial regulators. According to unnamed senior bankers quoted in the report:
“CD tokens are considered stable from the point of view of banks because they are not much different from the existing system.”
Another important feature is the potential compatibility of CDs with CBDCs. Both the banks mentioned above are participating in the proof of concept test for the CBDC by Bank of Korea.
In July, the Bank of Korea made its ongoing preparations for Possible introduction of CBDCIncluding research on the use of smart contracts, offline payments with near-field communication, and cross-border payments.
The pilot program is already underway with 14 private banks. However, there are still some technical issues: the system, which can handle 2,000 transactions per second, more than most domestic payment systems, has become slow as it reaches capacity. Bank of Korea is now looking for ways to improve the technical capabilities of its project.
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