South Korean banks favor tokenized deposits as an alternative to stablecoins in preparation for CBDC
Date: 2023-07-24 Categories: PAYMENT SOLUTIONS, CRYPT
South Korean banks are favoring certificate of deposit (CD) tokens as a potential alternative to "volatile" stablecoins, South Korean news organization Pulse reported on July 24.
According to Pulse, industry sources said that Hana Bank plans to explore CD tokens as part of the bank's preparations for a potential Central Bank Digital Currency (CBDC) project led by the Bank of Korea.
Woori Bank has also shown interest in CD tokens, as evidenced by a recent report published by its research body.
Cryptocurrency regulation of South Korea
The event comes as South Korea's financial regulators are drafting the final aspects of new regulations for the country's cryptocurrency industry.
As Cryptoslate previously reported, the upcoming legislation will focus on regulating the issuance of cryptoassets, eliminating conflicts of interest, and creating a solid foundation for stablecoin oversight.
Following the passing of the Virtual Asset User Protection Act earlier this year, which introduced protective measures for investors, the Financial Services Commission (FSC) is considering expanding the scope of the law to include crypto asset management firms following the recent suspension of withdrawals by two investment firms. . platforms, Delio and Haru Investments, due to their interconnectedness.
CD tokens
According to Pulse, CD tokens, which turn bank deposits into tokens using blockchain technology, could replace payments currently made directly from bank accounts. This interest in CD tokens especially increased after the collapse of Silicon Valley Bank (SVB) in March of this year.
Unlike stablecoins, CD tokens are based on existing banking systems and provide greater security as transactions are made using CBDCs issued by central banks.
Pulse also highlighted one of the most important features of CD tokens - the requirement for identity verification, since they are issued based on bank deposits. For legacy financial institutions, this can provide an advantage over stablecoins, which can become untraceable once issued, creating potential regulatory oversight and fraud prevention issues.
Stablecoins in Asia Pacific
This development of the South Korean banking sector is consistent with the wider global adoption of digital currency and stability trends. For example, Circle, the USDC stablecoin provider, recently announced its interest in targeting 74% of Asia Pacific (APAC) merchant accounts that are billed in US dollars.
Circle believes that the digital dollar, in particular the USDC, has the potential to significantly impact the financial landscape of the Asia-Pacific region, given the dominance of the dollar in the region's financial transactions over the past two decades.
Circle CEO Jeremy Aller highlighted USDC's potential in the Asia-Pacific region, saying it's clear.
“USDC takes the power of the dollar and gives it the power of the internet, allowing it to move as quickly and easily as a text message.”
Circle aims to revolutionize cross-border payments, drastically reduce the cost of remittances, and make humanitarian aid easier to track.
As FSC prepares for its second round of regulatory evaluation, the advent of CD tokens and Circle's expansion plan could ignite a battle between CD and stablecoins for digital asset market share.
Banks' concerns about decentralized digital assets and a preference for traceable tokens reinforce global expectations that CBDCs will emerge and give governments or central banks even greater access to citizens' financial history.
According to Pulse, industry sources said that Hana Bank plans to explore CD tokens as part of the bank's preparations for a potential Central Bank Digital Currency (CBDC) project led by the Bank of Korea.
Woori Bank has also shown interest in CD tokens, as evidenced by a recent report published by its research body.
Cryptocurrency regulation of South Korea
The event comes as South Korea's financial regulators are drafting the final aspects of new regulations for the country's cryptocurrency industry.
As Cryptoslate previously reported, the upcoming legislation will focus on regulating the issuance of cryptoassets, eliminating conflicts of interest, and creating a solid foundation for stablecoin oversight.
Following the passing of the Virtual Asset User Protection Act earlier this year, which introduced protective measures for investors, the Financial Services Commission (FSC) is considering expanding the scope of the law to include crypto asset management firms following the recent suspension of withdrawals by two investment firms. . platforms, Delio and Haru Investments, due to their interconnectedness.
CD tokens
According to Pulse, CD tokens, which turn bank deposits into tokens using blockchain technology, could replace payments currently made directly from bank accounts. This interest in CD tokens especially increased after the collapse of Silicon Valley Bank (SVB) in March of this year.
Unlike stablecoins, CD tokens are based on existing banking systems and provide greater security as transactions are made using CBDCs issued by central banks.
Pulse also highlighted one of the most important features of CD tokens - the requirement for identity verification, since they are issued based on bank deposits. For legacy financial institutions, this can provide an advantage over stablecoins, which can become untraceable once issued, creating potential regulatory oversight and fraud prevention issues.
Stablecoins in Asia Pacific
This development of the South Korean banking sector is consistent with the wider global adoption of digital currency and stability trends. For example, Circle, the USDC stablecoin provider, recently announced its interest in targeting 74% of Asia Pacific (APAC) merchant accounts that are billed in US dollars.
Circle believes that the digital dollar, in particular the USDC, has the potential to significantly impact the financial landscape of the Asia-Pacific region, given the dominance of the dollar in the region's financial transactions over the past two decades.
Circle CEO Jeremy Aller highlighted USDC's potential in the Asia-Pacific region, saying it's clear.
“USDC takes the power of the dollar and gives it the power of the internet, allowing it to move as quickly and easily as a text message.”
Circle aims to revolutionize cross-border payments, drastically reduce the cost of remittances, and make humanitarian aid easier to track.
As FSC prepares for its second round of regulatory evaluation, the advent of CD tokens and Circle's expansion plan could ignite a battle between CD and stablecoins for digital asset market share.
Banks' concerns about decentralized digital assets and a preference for traceable tokens reinforce global expectations that CBDCs will emerge and give governments or central banks even greater access to citizens' financial history.
