South Korea’s leading bank, the Shinhan Bank, has announced that it has completed developing a proof-of-concept with a global megabank based outside of South Korea. The proof-of-concept was completed in partnership with Hedera Hashgraph (HBAR).
The proof-of-concept has been designed to enable international remittances leveraging stablecoins using the Hedera Network. The project will also utilize the Hedera Token Service (HTS) and the Hedera Consensus Service (HCS), testing the issuance and distribution of stablecoins in a scenario that typically features long waits, high fees, and no tracking capabilities.
Significantly Lower Transaction Times
Shinhan Bank’s new proof-of-concept can send money internationally in seconds and for a significantly low transaction fee through the Hedera Network. Hedera has claimed that average transaction fees on its network are as low as $0.0001, while the average time taken to complete a transaction is around 3-5 seconds. Both metrics are a significant improvement over transaction fees and times offered by traditional remittance methods.
Hedera has stated in an announcement made on 29th November that it is exploring the possibility of issuing and distributing stablecoins for financial use cases while also offering lower fees and higher transaction speeds than current methods, while also enabling transactions to be tracked.
An Outdated System
Currently, while making cross-border transfers, individuals and organizations have to incur a significant cost in the form of high intermediary bank costs. The fees are even higher if a transfer has to be made between countries that lack liquidity or a direct network. The customer would end up paying a high intermediary fee, in addition to the regular cross-border transfer fees.
These transactions also take a significant amount of time, typically requiring four to seven days to complete. There is also no method through which a customer can track the status of the transactions. With Shinhan Bank’s stablecoin solution, customers will receive funds in a locally backed stablecoin and with extremely low fees attached.
Using Stablecoins For Remittances
The Shinhan Bank will mint South Korean Won (KRW)-backed stablecoins, while its partnering bank will mint stablecoins backed by its local currency. Customers can purchase stablecoins backed by KRW and issued by Shinhan Bank and send them to the intended account in the partner bank. Recipients can then receive the funds in a locally backed stablecoin and exchange it to receive their funds in their local currency.
The participating banks will utilize the Hedera Consensus Service to track and record the transaction. This will also confirm the foreign exchange rate prevailing at the time of the transaction.
A Significant Market
Speaking about Shinhan’s stablecoin solution, the co-founder and CEO of Hedera stated that he believed this is a significant opportunity to root out the middlemen and make remittances more efficient and cost-effective.
“International remittances were a massive market of $702 billion in 2020, with $539 billion going to low- and middle-income countries. 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. We commend Shinhan and their partner for developing this solution and are proud that it takes advantage of the economic and speed benefits that only the Hedera network can provide.”
A Leader In Financial Innovation
South Korea’s Shinhan Bank is a leader in driving financial innovation and leveraging Distributed Ledger Technology. Shinhan has invested in the Korea Digital Asset Custody, a consortium of businesses providing custody services for digital assets. In March, the bank also created a demonstration platform for CBDCs and joined the Hedera Governing Council in April 2021.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
