- Shinhan Bank and SCB Tech X have completed a proof of concept (PoC) to utilise stablecoins on the Hedera public Distributed Ledger Technology (DLT).
- The trial involved cross-border remittances and real-time foreign exchange (FX) using Hedera’s EVM-compatible technology, significantly reducing costs and enhancing speed.
In an industry first, Korea’s Shinhan Bank, and SCB Tech X, a division of Siam Commercial Bank, have successfully executed a proof of concept (PoC) for utilizing stablecoins on the Hedera public Distributed Ledger Technology (DLT). This trial marks Shinhan’s second experiment with Hedera’s DLT, following a previous run with South Africa’s Standard Bank, both members of the Hedera governing council.
Stablecoins Redefining Financial Inclusion
“Stablecoins provide a cost-effective, swift, and dependable method for transnational value transfer, propelling financial inclusion and enhancing financial services accessibility for underserviced individuals and businesses,”
said Byunghee Kim, head of blockchain at Shinhan Bank.
Kim further emphasized how Hedera’s EVM (Ethereum Virtual Machine)-compatible technology can streamline processes by eliminating intermediaries, thereby reducing costs and expediting remittances. This technology forms the backbone of Hedera’s smart contract capabilities, which are fully compatible with Ethereum.
The majority of stablecoin usage currently lies within crypto transactions, with a significant portion reserved for peer-to-peer payments. A considerable discrepancy exists in remittance costs globally, with countries like India offering cheaper rates due to high volumes. Contrarily, certain regions exhibit exorbitant fees reaching up to 35%.
The Inner Workings of Interbank Stablecoins
Traditional correspondent banking necessitates global accounts for facilitating payments. Stablecoin solutions offer a workaround through an intermediary currency, like a dollar stablecoin. This implies that banks only need to maintain liquidity between their local currency and the dollar.
In an illustrative scenario, if a Korean individual wishes to send money to Thailand, they could utilize a Shinhan Bank stablecoin. Shinhan can maintain a private liquidity pool with the USDC stablecoin, allowing the Korean won to be converted to dollars. Subsequently, if SCB holds a private liquidity pool between USDC and the Thai baht, the received USDC stablecoin can be converted into baht. With minimal transaction costs, the major charge boils down to the FX margin.
Lastly, Hedera’s DLT, with EVM smart contracts, can perform 300 transactions per second, providing a robust solution to public blockchain and DLT scalability issues. It’s noteworthy that Hedera’s native token service can escalate up to 10,000 transactions per second, an indication of the technology’s promising future in the blockchain space.