South Korean bank completes pilot program for digital currencies

Written by: Ali Raza
March 11, 2021
  • The bank says it may be used as an intermediary when South Korea eventually launches its CBDC.
  • The digital currencies were circulated to individuals for foreign exchange, remittances, and payments.
  • Korea’s central bank has not decided whether how it will distribute the CBDC when it is rolled out.

South Korean Shinhan Bank has announced the completion of a pilot program for central bank digital currencies (CBDC), a project it collaborated with LG CNS.

The project was first announced in November last year, and it seems to be independent of the central bank.

The anticipation of South Korea’s CBDC

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Shinhan Bank has its headquarters in Seoul and says the pilot program is a plan ahead in the event of an issuance of a CBDC by the South Korean government.

Shinhan Bank opines that the South Korean government will need the services of intermediaries like Shinhan Bank when it wants to roll out a CBDC. The bank has also stated that CBDC intermediaries will be an important part of the digital Won when it is eventually rolled out by the South Korean government.

In anticipation, the platform will give room for a “virtual” Bank of Korea that will issue the mock digital currency. This will be based on a blockchain platform and distributed to Shinhan Bank as an intermediary.

During the pilot phase, Shinhan Bank stated that the digital currencies were circulated to individuals who could use them for foreign exchange, remittances, and payments. Also, users can convert their funds in their bank accounts to digital won (KRW). Additionally, the currency is open for use on what is known as a local government disaster support fund.

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Getting deeper into the blockchain industry

Shinhan Bank has also invested more of its resources into the blockchain and cryptocurrency industry. Earlier this year, the bank invested in Korea Digital Asset Trust which provides custody of digital assets. It has also supported several blockchain-based projects in the past.

South Korea’s central bank, BOK, has already concluded research into the issuance of a CBDC, which was published last month. After issuing the lengthy report, BOK revealed that it must address important legal issues with digital currencies before it can move forward with the project.

However, the central bank has not decided whether it would distribute the digital won through intermediaries like Shinhan Bank or directly to consumers.