The Bank of Korea Central Bank Focuses on 'Digital Currency'

Active Movements by Hana and Shinhan, etc.

[Image source=Yonhap News]

[Asia Economy Reporter Kiho Sung] Stimulated by the private cryptocurrency Bitcoin craze, interest among commercial banks in the introduction of the 'Central Bank Digital Currency (CBDC)' being promoted by the Bank of Korea is increasing. In addition, some regional banks facing difficult management situations due to the growth of internet-only banks and regional economic stagnation are actively pursuing projects related to cryptocurrencies.

According to the financial sector on the 20th, Hana Bank recently conducted CBDC technology verification with the POSTECH Crypto Blockchain Research Center and plans to build a pilot system by the end of this month. Currently, commercial banks play the role of distributing money issued by the Bank of Korea into the market. Hana Bank intends to test the distribution of CBDC issued by the Bank of Korea to the market under the same concept.

Shinhan Bank completed a pilot digital currency platform build last month in collaboration with LG CNS. Shinhan Bank also stated that if the Bank of Korea issues CBDC, an intermediary institution will be needed for smooth circulation of digital currency in the market, and thus proceeded with the pilot build. KB Kookmin Bank declared participation in virtual asset custody services through equity investment in Korea Digital Asset last November.

The banks' interest in cryptocurrencies has changed 180 degrees recently. Banks such as Kookmin, Woori, and IBK Industrial Bank, which had previously conducted cryptocurrency remittance services, withdrew in early 2018 due to the government's 'Cryptocurrency Anti-Money Laundering Guidelines' and hacking incidents, but have recently regained interest and attention.

Regional banks, which are fighting for liquidity, are also actively engaging in cryptocurrency-related businesses. Busan Bank of BNK Financial Group and Jeonbuk Bank of JB Financial Group are working on partnerships with cryptocurrency exchanges in accordance with the 'Act on Reporting and Using Specified Financial Transaction Information' (Special Financial Transactions Act), which will be fully applied from September.

Bithumb and Coinone have already partnered with NH Nonghyup Bank, while Korbit and Upbit have obtained real-name accounts from Shinhan Bank and K Bank, respectively. In particular, after K Bank partnered with Upbit, its deposit amount increased fivefold in nine months, making it a key business for regional banks.

However, there are criticisms that legal and regulatory improvements are necessary for the activation of cryptocurrencies in the banking sector. According to the Special Financial Transactions Act enforced on the 25th of last month, banks must decide whether to issue real-name deposit and withdrawal accounts. This effectively places the responsibility for 'comprehensive certification' of each exchange on the banks, which is seen as an excessive burden.

A banking sector official said, "The survival of exchanges depends on whether real-name accounts are issued, and there are concerns that banks could be held responsible in case of incidents," adding, "Clear guidelines from authorities and legal improvements are necessary."

This content was produced with the assistance of AI translation services.