South Korea’s Shinhan Bank has accomplished the second proof-of-concept using stablecoins for international remittances.
The project also included participation from an unnamed Taiwanese financial institution and the SCB TechX division of Siam Commercial Bank. Real-time settlement and foreign exchange integration with the national currencies of the banks were carried out as part of the project on the Hedera network.
The project allowed various stablecoins to use it because it was compatible with the Ethereum Virtual Machine (EVM). In November 2021, Shinhan Bank collaborated on its first proof-of-concept project with Standard Bank of South Africa, whose name was later made public.
At the time, the Bank revealed that it created a pool of stablecoins backed by South Korean won while the collaborating bank created a stablecoin using its local currency.
Users could purchase stablecoins issued by Shinhan and transfer them to a partner bank account. The user might swap the money that was provided by that bank in the locally based stablecoin. Byunghee Kim, head of the blockchain division at Shinhan Bank, said:
“We are pleased to have demonstrated how the use of Hedera’s EVM-compatible technology helps eliminate intermediaries, reduce costs, and speed up the remittance process.”
Remittances are international payments that are not for profit. Typically, they are slow, expensive, and difficult to track. Earlier this year, a representative of the International Monetary Fund claimed that the yearly fee revenue for remittance providers is $45 billion.
In Web3 remittance systems, stablecoins offer an alternative to central bank digital currency (CBDC). There are many CBDC cross-border payment initiatives, some specifically intended for remittances.
However, only some CBDCs have been created, so technology is still in its infancy. Stablecoin-based remittance options, particularly in Latin America, are growing in popularity.
