Several private banks in South Korea are evaluating the viability of certificate of deposit (CDs), a tokenized deposit technology as an alternative to private stablecoins and central bank digital currencies (CBDCs).
Hana Bank and Woori Bank, both private companies with headquarters in Seoul, expressed interest in so-called “certificate of deposit” tokens (CDs), as Maeli Business News Korea reported. CDs are tokenized bank deposits that have been added to the blockchain.
They can supplant conventional currency and deposits without disrupting the current banking system. CDs require the same level of identity verification as any other traditional bank service.
Hana Bank intends to research CD tokens, whereas Woori Bank‘s research division recently published a report on them.
From the perspective of financiers, CDs have a few disadvantages. According to the report, the financial regulators’ interest in them originates from their concern over stablecoin failures in 2022. The report cites anonymous senior financiers as its sources.
“CD tokens are perceived as stable from the banks’ perspective since they do not differ significantly from the current system.”
CDs’ potential compatibility with CBDCs is a further essential feature. Both institutions participate in the Bank of Korea’s CBDC proof of concept test.
In July, the Bank of Korea disclosed that it was investigating smart contracts, offline payments with near-field communications, and cross-border payments in preparation for the prospective introduction of a CBDC.
The pilot program involving 14 private institutions is currently operational. However, there are still some technical issues; the system, which has been able to process 2,000 transactions per second, which is more than most domestic payment systems can manage, slowed down as it reached capacity.
The Bank of Korea is currently investigating methods to enhance the technical capabilities of its endeavor.
