Shinhan Bank and LG CNS Develop Blockchain-based CBDC Pilot Platform in South Korea

Shinhan Bank and LG CNS Develop Blockchain-based CBDC Pilot Platform in South Korea

Shinhan Bank, a leading South Korean commercial lender, has teamed up with its associate LG CNS, the IT arm of conglomerate LG Corporation, to develop a blockchain-based platform for testing a Central Bank Digital Currency (CBDC). The platform is currently in its pilot stage, designed to facilitate the issuance and use of digital currency in South Korea. The platform will model a virtual CBDC issued by the Bank of Korea to assess its functionality and potential.

Shinhan Bank’s Role in the CBDC Ecosystem

The South Korean government, led by the Bank of Korea, has already launched its CBDC pilot program to explore the technicalities and legalities of the digital won. However, the central bank has clarified that it does not intend to issue a CBDC in the immediate future. As per local news reports, the Shinhan-LG CNS platform serves as an intermediary in the CBDC system, where Shinhan Bank will facilitate the distribution and usage of the digital currency while the Bank of Korea will remain the issuer.

Blockchain-Based CBDC Platform for Payments and Remittances

The new platform allows users, including individuals and affiliated entities, to make payments, remittances, and foreign exchange transactions using the digital currency issued by the Bank of Korea. This technology ensures that all CBDC transactions are securely processed, supported by a blockchain-based intermediary platform. Notably, blockchain technology is pivotal in assuring transaction stability and security, distinguishing South Korea’s CBDC platform from China’s digital yuan model, which does not rely on blockchain technology.

Shinhan Bank’s Increased Investment in Blockchain and Crypto

Shinhan Bank has been actively expanding its presence in the crypto and blockchain industries. In January, the bank invested in the Korea Digital Asset Trust, a consortium focused on digital-asset custody. Furthermore, Shinhan participated in a $7.5 million funding round for Blocko, a blockchain platform, and supported blockchain-based stock lending projects. These strategic investments signal the bank’s increasing commitment to digital finance and blockchain technologies.

Bank of Korea’s CBDC Advancements

The Bank of Korea has been progressing with its digital won project since the launch of its CBDC trials in April 2020. A comprehensive report published in February 2021 discussed the legal issues surrounding the issuance of CBDCs and the role they could play in South Korea’s digital economy. Despite the ongoing trials, the central bank has yet to provide a clear timeline for the launch of a fully-fledged CBDC.

Looking Forward

The development of this blockchain-based CBDC platform by Shinhan Bank and LG CNS marks a significant step forward in South Korea’s exploration of digital currencies. As global interest in CBDCs grows, South Korea’s collaboration between the private sector and regulatory bodies could serve as a model for other countries considering the future of digital finance.

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