Hana Bank and Woori Bank Explore Tokenized Deposit Technology
Hana Bank plans to conduct research on certificates of deposit tokens, while Woori Bank’s research department has recently released a report on the tokens.
Several private banks in South Korea are currently studying the potential of tokenized deposit technology as an alternative to both private stablecoins and central bank digital currencies (CBDCs).
Interest in “Certificate of Deposit” Tokens (CDs)
According to a report from Maeli Business News Korea, both Hana Bank and Woori Bank, private enterprises headquartered in Seoul, have shown interest in “certificate of deposit” tokens (CDs). CDs represent tokenized bank deposits placed on the blockchain, offering a seamless replacement for customary notes and deposits without disrupting the existing banking system. Additionally, CDs require identity verification to meet the same standards as any traditional bank service.
Advantages of CD Tokens from Bankers’ Perspective
CDs are perceived as stable from the banks’ perspective, as they closely resemble the current banking system. The interest in these tokens has arisen due to the anxiety caused by stablecoin failures in 2022, which raised concerns among financial regulators. Anonymous senior bankers, as cited in the report, have expressed confidence in the stability of CD tokens.
Potential Compatibility with CBDCs
Another crucial feature of CDs is their potential compatibility with central bank digital currencies (CBDCs). Both Hana Bank and Woori Bank are actively participating in the proof-of-concept test for a CBDC conducted by the Bank of Korea.
Bank of Korea’s Preparation for CBDC Introduction
In July, the Bank of Korea announced its ongoing preparation for the potential introduction of a CBDC. The preparation includes exploring the utilization of smart contracts, enabling offline payments with near-field communications, and facilitating cross-border payments.
Pilot Program and Technical Challenges
The pilot program involving 14 private banks is already operational. However, the system has encountered some technical challenges. While it has been successfully handling 2,000 transactions per second, higher than what most domestic payment systems can handle, it experienced slowdowns when approaching capacity. The Bank of Korea is actively exploring ways to enhance the technical capacities of the project.
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