South Korea-based Shinhan Bank recently wrapped up testing the use of stablecoins for cross-border transactions. The bank completed a proof-of-concept issuing and distributing stablecoins with an unnamed “megabank” outside of Korea. The two are leveraging the Hedera Network’s Hedera Token Service (HTS) and Hedera Consensus Service (HCS) to make the transfers.
Shinhan Bank will mint stablecoins backed by the South Korean Won (KRW), while the unnamed bank will mint stablecoins backed by its local currency. Under their partnership, customers can buy Shinhan’s KRW-based stablecoin and send them to an account at the other, unnamed bank. The recipient of the funds can then exchange the stablecoins for local currency.
Shinhan Bank opted to target international remittences because it is one of the sub-sectors with the most room for disruption. Cross-border transactions generally cost customers high intermediary bank costs, take three-to-seven days to complete, and don’t allow customers to track the funds while they are in progress.
“International remittances were a massive market of $702 billion in 2020, with $539 billion going to low- and middle-income countries,” said Hedera CEO and Co-founder Mance Harmon. “There is a massive opportunity to cut out the middleman and make this process dramatically more efficient and cost-effective, getting the most money possible to people who often need it urgently. We commend Shinhan and their partner for developing this solution, and are proud that it takes advantage of the economic and speed benefits that only the Hedera network can provide.”
This isn’t Shinhan Bank’s first time leveraging decentralized finance. In March, the bank partnered with LG CNS to create a platform for central bank digital currencies (CBDCs). The banks has also invested in Korea Digital Asset Custody (KDAC), a group of businesses that provide digital-asset custody services, and joined the Hedera Governing Council in April 2021.