South Korean Banks Explore Tokenized Deposits as CBDC Alternative

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Key takeaways:

  • Certificate of Deposit tokens are becoming more popular among South Korean banks as stablecoin alternatives.
  • Woori Bank’s research division has published a report on CD tokens, whereas Hana Bank intends to study CD tokens.

Tokenized deposit technology, a substitute for both private stablecoins and central bank digital currencies (CBDCs), is being researched by a number of private banks in South Korea. 

Hana Bank and Woori Bank, two private companies with headquarters in Seoul, have shown keen interest in so-called “certificate of deposit” tokens (CDs), according to a report from Pulse News. 

Without interfering with the current banking system, CDs replace conventional notes and deposits by becoming tokenized bank deposits placed on the blockchain. The same standards for identification verification as any typical bank service are likewise required for CDs.

Woori Bank’s research division has published a report on CD tokens, whereas Hana Bank intends to study CD tokens.

As reported by Pulse News, CD tokens may take the place of payments that are currently made using money taken directly out of bank accounts. Following the failure of Silicon Valley Bank (SVB) in March of this year, demand for CD tokens was noticeably stoked.

According to bankers, there don’t seem to be many drawbacks to CDs. According to the research, the concern that the stablecoin failures of 2022 caused among financial regulators is what spurred interest in them. In the report, senior bankers who wish to remain unnamed said:

“CD tokens are perceived as stable from the banks’ perspective since they do not differ significantly from the current system.” 

The ability of CDs to work with CBDCs is a crucial aspect. Both of the institutions as mentioned above are taking part in the Bank of Korea’s proof-of-concept trial for a CBDC. 

This event occurs as South Korea‘s financial watchdogs are planning the last details of brand-new regulations for the nation’s cryptocurrency business.

The upcoming legislation will put a strong emphasis on stabilizing stablecoins, addressing conflicts of interest, and regulating the issuance of crypto-assets.

The Financial Services Commission (FSC) is thinking about expanding the Virtual Asset User Protection Act’s reach to cover crypto asset management companies shortly after the sudden suspension of withdrawals by two investment platforms, Delio and Haru Investments, due to their interdependence. The Act was passed earlier this year, introducing protective measures for investors.

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