South Korean Bank Collaborates with Central Bank on CBDC Pilot and Tokenised Deposits

South Korea's KEB Hana Bank is partnering with the central Bank of Korea (BOK) for its CBDC (Central Bank Digital Currency) pilot, focusing on stablecoin alternatives, including tokenised deposits.

Hana Bank is actively participating in the BOK's ongoing CBDC Proof of Concept project, which aims to establish a currency system based on blockchain technology.

Central banks, seeking inspiration from popular stablecoins for their CBDC initiatives, aim to enhance conventional stablecoin designs.

These banks refer to these stablecoins as "private tokenised monies that circulate as bearer instruments."

However, due to some level of price volatility experienced by algorithimic stablecoins like USD-pegged USDT, central banks are keen to avoid such issues with their CBDC projects.

In April, the Bank for International Settlements (BIS) published a paper suggesting that tokenised deposits, settling in central bank money and not circulating as bearer instruments, are more suitable for maintaining the "singleness of money."

The BIS also highlighted the potential for expanded functionality with tokenised deposits, building upon programmable ledgers for contingent execution and composability of transactions.

The BOK seems to be following these recommendations and exploring tokenised deposits as a viable option for its CBDC efforts.

South Korean commercial banks, concerned about their position in the CBDC landscape, are eager to establish a niche in this area.