South Korea’s Shinhan Bank today announced it has completed the development of a proof-of-concept, with a global megabank outside of Korea, to improve the remittance process through the use of stablecoins. It is built on the Hedera network, leveraging stablecoins and focused on international remittances. Utilizing the Hedera Token Service and Hedera Consensus Service, the project aims to test the issuance and distribution of stablecoins, applied to a financial use case that typically suffers from high fees, longer waits and absence of tracking feature.
Under current financial systems, when individuals or organizations send cross-border transfers, the customer bears high intermediary bank costs. For cross-border transfers between countries that lack liquidity and a direct network, customers typically pay the equivalent of an extra $20-$80 for intermediaries’ fees on top of regular cross-border transfer fees. Transactions typically take three to seven days to be completed. Furthermore, the customer has no visibility during the transaction, and cannot track his or her transfer during the process. With the stablecoin solution developed by the banks, individuals and organizations can send and receive funds in a locally denominated stablecoin, with lower fees.
Shinhan plans to mint South Korean Won (KRW)- backed stablecoins and the partnering bank will mint stablecoins backed by their local currency. Users will be able to buy KRW-based stablecoin that Shinhan issues, and send them to an account at the partner bank. The recipient will then be able to receive the funds in a locally denominated stablecoin and exchange it for the local currency. The two banks will use the Hedera Consensus Service both to track and record transactions and confirm the foreign exchange rate at the time of each transaction.
“International remittances were a massive market of $702 billion in 2020, with $539 billion going to low- and middle-income countries,” said Mance Harmon, co-founder and CEO of Hedera. “There is a massive opportunity to cut out the middleman and make this process dramatically more efficient and cost-effective, getting the most money possible to people who often need it urgently.”
In January, Shinhan invested in Korea Digital Asset Custody (KDAC), an industry consortium of businesses that provide digital-asset custody services. In March, Shinhan completed a demonstration platform for central bank digital currencies, together with LG CNS. The company joined the Hedera Governing Council in April.
“Joining the Hedera Governing Council this spring has allowed us to significantly accelerate our engagement with other global industry leaders to leverage the power of Hedera’s fast, fair, green public distributed ledger,” Shinhan Bank said in a statement. “Cost-effective, efficient international remittance is the perfect, real-world financial use case to build on a network that provides Hedera’s speed and low cost. We are excited to work with a leading global banking partner to deliver the first of what we hope will be many solutions that drive the next generation of finance and financial inclusion.”