Today Korea’s Shinhan Bank announced its partnership with LG CNS, the IT services subsidiary of the conglomerate LG, to develop and pilot a blockchain-based digital currency platform. Shinhan Bank does not intend to issue its own digital currency. Instead, the partnership is in anticipation of the Bank of Korea’s (BOK) future issuance of central bank digital currency (CBDC).
The model platform will be able to issue and settle CBDCs, as well as have distribution, payment, and exchange functions. Other features include verifying key functions and analyzing the digital currency’s impact on retail banks and customers. On a slightly controversial topic, it has not yet been decided whether to use the platform’s payment data for other purposes.
An official of Shinhan Bank said, “We will try to provide differentiated value to our customers based on our own experience in blockchain technology. Starting with this agreement, we will continue to collaborate with LG CNS on blockchain technology.”
Shinhan Bank has vast experience in blockchain technology, from decentralized identity (DID) authentication to loan application services. Shinhan Bank adopted the technology as early as November 2018, using blockchain for derivatives only a month later. In May 2019, the Bank introduced a blockchain credentialing solution for loan applications. More recently, Shinhan Bank deployed a blockchain DID solution for its own customers. Initially, the solution is to be used for changing logins for online banking, but there are future plans to incorporate features like KYC.
In comparison to Shinhan Bank, the BOK has not been as active in blockchain technology research and development. However, as with many central banks around the globe, the BOK is becoming increasingly interested in CBDCs. Earlier this year, BOK announced a blockchain platform for government bonds, focusing on testing real-time settlement or delivery versus payment rather than bond issuance. At the time, it was quiet on the question of whether it will issue CBDCs, but the BOK soon revealed CBDC pilot plans. In early October, the Bank disclosed more details of its digital won pilot, including a two-tier system that uses banks for retail distribution, similar to how physical cash is distributed.
