Korea's banking sector is putting effort into pilot tests for a won-based stablecoin. Because stablecoins carry the potential to expand new financial infrastructure such as overseas remittances and tokenized securities (STO), beyond serving as a simple means of payment, they could become a new growth engine for financial firms.
According to the financial industry on the 18th, Woori Bank recently completed a proof of technology for a won-based stablecoin together with BDACS, a domestic custody corporations BDACS. From depositing won margin to issuance, they finished practice on the global network Avalanche. Woori Bank will take on a core infrastructure role, including custody of the collateral funds for the stablecoin issued by BDACS.
Earlier on the 16th, Shinhan Bank, NH Nonghyup Bank, and Kbank collaborated to complete the first phase of verification for the Pax Project, which seeks the practical applicability of stablecoins. The Pax Project is a test-type project that examines legal and technical improvement tasks for cross-border remittances, in cooperation with a joint venture of Japan's three megabanks.
Verification for the Pax Project involved converting won in Korea into a won stablecoin, remitting it via blockchain, and then exchanging it for yen in Japan. In the subsequent second-phase technical verification, the participating banks plan to pursue real-time interoperability through linkage with the Society for Worldwide Interbank Financial Telecommunication network, delivery-versus-payment to ensure simultaneous exchange of counterpart currency, and expansion to small-amount remittances.
In addition, the Open Blockchain and DID Association (OBDIA), which includes 13 domestic banks, is conducting a proof of concept related to issuing a won stablecoin together with its member company, blockchain technology firm FairSquare Lab. Shinhan Bank is conducting an experiment applying stablecoins to its delivery application (app) "Ttaenggyeoyo."
Various attempts by the financial sector, including banks, are aimed at preempting new financial infrastructure. Through the stablecoin business, banks can lower expense and increase speed in overseas remittances and e-commerce payments. For banks that need to move away from a traditional interest-centered revenue structure, stablecoins are cited as a solution to expand non-interest revenue.
In addition, when investors open an account to newly issue stablecoins, the stablecoin issuer can charge a fee for verification. They can also generate revenue by imposing fees when issuing stablecoins and converting them back. A financial industry official said, "Recently, the banking sector has been testing the potential of stablecoins as a means of payment and an alternative for remittances," adding, "For the banking sector, which needs new sources of income, this is an opportunity it cannot give up."