The major South Korean commercial bank Shinhan Bank intends to work with the country’s central bank to develop a national digital currency.
Shinhan Bank, in collaboration with LG Corporation’s IT services division, LG CNS, has developed a blockchain-based pilot platform for a central bank digital currency (CBDC), the South Korean news agency Yonhap reported on Monday.
Shinhan Bank and LG CNS have created a virtual CBDC model in which the Bank of Korea issues a CBDC while other banking institutions such as Shinhan Bank act as financial intermediaries. Stressing that CBDC intermediaries would be an integral part of a digitally won ecosystem, the bank stated, “If the Bank of Korea issues a CBDC, an intermediary agency will be required for the smooth distribution and use of digital currencies.”
According to the report, Shinhan Bank’s CBDC system enables individuals and affiliates to use the issued CBDC for payments, wire transfers and foreign exchange transactions. The platform also divides the CBDC issuance into general funds held by individuals and government funds designed for specific purposes such as emergency funding.
The report does not indicate which blockchain network was used. Shinhan Bank and LG CNS did not immediately respond to Cointelegraph’s request for comment.
As previously reported, Shinhan Bank is deepening its engagement in the crypto and blockchain industry. In January 2021, Shinhan Bank invested in Korea Digital Asset Trust, an industry consortium of companies offering digital asset custody. The bank also participated in a $ 7.5 million blocko financing round and supported blockchain-based projects for stock lending.
The Bank of Korea has now made rapid progress with its CBDC. After the South Korean central bank began digital won trials in April 2020, it released an in-depth report in February stating that critical legal issues with digital currencies must be addressed in order to move forward.