Yesterday Shinhan Bank confirmed that it completed a demonstration platform for central bank digital currencies (CBDC) together with LG CNS. First announced four months ago, the initiative appears to be independent of the central bank.
Shinhan Bank predicts that when the Bank of Korea issues a CBDC, it will need to use intermediaries such as Shinhan Bank. Anticipating this, the platform enabled a ‘virtual’ Bank of Korea to issue the mock digital currency as a blockchain token and distribute it to Shinhan Bank as an intermediary.
In turn, the bank circulated it to individuals who could use it for payments, remittances and foreign exchange. Individuals can convert their bank account funds to digital won (KRW). It also supports what it refers to as local government disaster support funds.
Regarding support funds, in Korea, several regions have issued local currencies, which in some cases are designed to encourage traffic to small retail businesses. Often the currencies provide cash back on purchases from small businesses, effectively acting as a subsidy. These currencies also have expiry dates which is something the Shinhan Bank trials accommodated.
LG CNS and Shinhan Bank plan to continue with the experiments.
Meanwhile, the Bank of Korea is rumored to be in talks about digital currency custody with HDAC Technology, which was founded by the CEO of Hyundai BS&C.
Last year Shinhan Bank made an investment in Korea Digital Asset Trust (KDAC), a consortium of startups focused on digital asset custody. Earlier in 2020, technology division Shinhan DS signed a deal with major Korean IT firm Hancom to develop digital asset solutions. As with other parts of the world, the digital asset custody space is hotting up. Fellow Korean bank KB Kookmin launched a digital assets joint venture with Hashed and Haechi Labs, called KODA.