Several private banks in South Korea are exploring the potential of tokenized deposit technology as an alternative to private stablecoins. Researchers are also interested in their interoperability with central bank digital currencies (CBDC).
Commercial banks in South Korea are increasingly interested in so-called certificate of deposit (CD) tokens that represent bank deposits tokenized with the help of blockchain. This is reported by local media.
In particular, large local banks like Hana and Woori are planning to conduct research on CD tokens. According to bank representatives, tokenized deposits can replace the usual paper bills and deposits while not disrupting the existing banking system since transactions with them require identity verification by the same standards as any traditional banking services.
From bankers’ perspective, CD tokens have few disadvantages compared to stablecoins. They’re also more stable from the perspective of TradFi participants, as they’re virtually indistinguishable from assets specific to the traditional financial system.
In addition, tokenized deposits are potentially interoperable with the CBDC system, which has been tested in South Korea for more than a year. The digital won testing program involves 14 commercial banks, and the country’s central bank is testing the possibility of using zero-knowledge proof (ZKP) technology to improve the system’s efficiency.
The use of tokenized deposits as a decentralized basis for commercial banking and an alternative to stablecoins was proposed in February 2023 by analysts of JPMorgan Chase.
