Shinhan Bank, SCB TechX, and Taiwan’s largest financial institution have successfully completed a stablecoin remittance proof-of-concept (PoC) pilot on the Hedera network, as announced on July 18th, 2023.
Shinhan Bank, a leading commercial bank in South Korea, boasts KRW 664.4 trillion in assets and serves 27 million customers. SCB TechX Co., Ltd., a digitally native, industry-leading platform-as-a-service business, provides innovative banking and non-banking services to commercial institutions and consumers throughout Southeast Asia.
The Hedera network, on which the pilot was conducted, is the most sustainable public ledger for the decentralized economy, built by a global community, and governed by a diverse council of industry-leading organizations.
The pilot, a major stride in the use of blockchain technology for cross-border payments, achieved real-time settlement and real-time foreign exchange (FX) rate integration across the Thai Baht (THB), New Taiwan dollar (NTD), and South Korean won (KRW). This was accomplished in a test environment that aligns with current production capabilities.
Notably, the PoC is EVM-compatible, opening the door for any EVM-based stablecoin issuers to participate using the framework in the future. This pilot is a continuation of Shinhan Bank’s previous work that began in 2021, when they partnered with Standard Bank on stablecoin international remittances.
Both Shinhan Bank and SCB TechX highlighted the potential of stablecoins in facilitating cross-border remittances. They emphasized that stablecoins offer a low-cost, fast, and reliable way to transfer value across borders. This could significantly increase financial inclusion and improve access to financial services for individuals and businesses in underserved communities.
Stablecoins, like the ones used in this pilot, are increasingly becoming a critical part of the crypto-asset ecosystem due to their frequent use in the trading of crypto-assets and as liquidity providers in Decentralized Finance (DeFi).
However, despite their name, stablecoins may not always be stable. Their stability is dependent on the management of their reserve assets, which if mismanaged, could lead to a loss of confidence and large-scale redemption requests, potentially leading to financial instability.
Despite these challenges, the use of stablecoins in cross-border remittances, as demonstrated by Shinhan Bank and SCB TechX, is a testament to their growing use cases.
However, the potential risks and cross-border nature of stablecoins call for the urgent implementation of effective regulatory, supervisory, and oversight frameworks before significant further interconnectedness with the traditional financial system occurs.