Eight major banks in South Korea have decided to create a stablecoin tied to the Korean won. This move shows their push to keep pace with the digital asset market and reduce reliance on dollar-linked coins.
These banks are KB Kookmin, Shinhan, Woori, Nonghyup, Korea Industrial Bank of Korea, Suhyup, Citibank, and SC First Bank. They operate with the Open Blockchain/DID Society. The Financial Supervisory Service is also involved in the given work. This is the first time these banks have collaborated to enter the digital asset space.
The objective is to develop a private, domestic digital currency that can prudently transact business internationally in payments and remittances. As is the case with the development of stablecoins by players such as Facebook Libra Coin, there has been the creation of a new form of monetary issuance by private players in the US and Japan.
Stablecoin Licensing backed by new Law
By now, the banks are holding talks on how to implement common systems. They plan to set up a joint venture bythe end of this year or early next year. This will depend on the legal updates required for that new digital product support. Two possible models are being reviewed.
One is the trust model, where coins are generated based on a separate fund. The other is a deposit token type, where there’s 100% backing of each issued currency into one’s bank account. This kind of movement paves the way for the introduction of the bill known as the Basic Digital Asset Act.
The bill holds the concept of licensing stablecoins. The Financial Services Commission plans to be more specific and will probably release a detailed roadmap within this year. It will embrace regulations for stablecoins as well as other digital securities. The banks see this move as crucial in helping them control the local digital finance space system
The project stands apart from digital won
The main aim is to prevent the Korean market from being dominated by foreign coins, particularly those that are dollarized. Through employing one side of the coin, they seek both the wants of protecting national control and supporting global competitiveness at the same time. This project is in no way connected with digital won, which is a cryptocurrency issued by a central bank.
Still, the two initiatives’ policymakers are expected to discuss how their efforts may be dovetailed in the future. A stablecoin is not confined to the scope of basic payments only, as stated by experts. The uses extend to cross-border transfers, digital shopping, and also p2p finance, particularly in Web3 settings.
The plan is still in its infancy, and legal support as well as consumer safeguards are not fully determined. Before the launch, the banks will have to get public trust created/established and solid expectations implemented on how users and the system should be treated.
