Shinhan Bank signs a business agreement with LG CNS on February 27 to build a pilot blockchain-based digital currency platform in preparation for the issuance of the Bank of Korea’s issuance of CBDCs. Hyun Shin-kyun (middle), vice president of LG CNS shows the agreement with Lee Myung-goo, vice president of Shinhan Bank’s Digital Group. (Photo: Shinhan Bank)

Shinhan Bank said on March 8 that it has completed a pilot digital currency platform based on blockchain with LG CNS with an eye on responding to the Bank of Korea’s central bank digital currencies (CBDCs). A CBDC is the digital form of a country's fiat currency that is also a claim on the central bank.

Shinhan Bank created the digital currency platform to carry out its duties as a brokerage agency, as the bank believes that issuing CBDCs will require brokerage agencies that will distribute them in the market, a Shinhan Bank official explained.

According to the Shinhan Bank official, a virtual Bank of Korea issues CBDCs and distributes them through brokerage agencies. Shinhan Bank pays individuals the CBDCs as a brokerage agency.

Individuals and merchants can use various financial services such as payment, remittance and foreign currency exchanges with CBDCs.

Shinhan Bank completed the platform system based on blockchain to boost transaction stability.

The platform divides forms of CBDC issuances into general funds exchanged from balances held by individuals and emergency relief funds for disaster-stricken people, which are issued by central and local governments for specific purposes, and manages ledgers by funds.

LG CNS utilized its strong blockchain technology and rich know-how in blockchain projects in order to complete the platform.

LG CNS is unrivaled in the blockchain business in Korea as the company has successfully carried out the largest number of blockchain projects among Korean IT service players.

In particular, it has accumulated technology and knowhow in financial transactions through cooperation with the Bank of Korea and the Korea Minting and Security Printing Corporation.

Shinhan Bank is planning to continue joint research and development based on blockchain technology by teaming up with LG CNS.

“We are planning to zero-in on the latest trends in CBDCs at home and abroad as their importance is spiking,” said a representative of Shinhan Bank.

“We will continue to make various attempts such as expanding the platform and applying it to the bank's internal system.”

A CBDC would likely be implemented using a database run by the central bank, government, or approved private-sector entities.

The database would keep a record of the amount of money held by every entity, such as people and corporations.

In contrast to cryptocurrencies, a central bank digital currency would be centrally controlled even if it was on a distributed database and so a blockchain or other distributed ledger would likely not be required or useful - even as they were the original inspiration for the concept.

Researchers propose multiple ways that a retail CBDC could be technologically implemented.

A CBDC is a high-security digital instrument. Like paper bank notes, it is a means of payment, a unit of account, and a store of value.

And like paper currency, each unit is uniquely identifiable to prevent counterfeit.

In addition, Shinhan Bank announced on March 3 that it will hold the Hey Young Special Interest Rate Event, which will provide a special annual interest rate of 5.5 percent to customers with Shinhan My Home Installment Savings.

The event will apply the special interest rate per annum if Hey Young customers born on or after 1991, who do not subscribe to apartment-application general deposits, subscribe to Shinhan My Home Installment Savings.

The subscription period will run until June 30. This special financial product will be sold to the first 40,000 customers on a first-come first-served basis.

Shinhan Bank decided to hold the event once again for customers who were disappointed that the special rate event ended early in three weeks in December 2020.

This time, Shinhan Bank expanded its subscription ages to allow minors to participate in the event.

In the meantime, Shinhan Bank was selected as the first ranker in the banking industry and an all-star company for the 18th consecutive year in the “2021 Most Respected Companies in Korea” Survey conducted by Korea Management Association Consulting (KMAC) in early March.

Marking its 18th year, the Most Respected Companies in Korea Survey is regarded by many as the most authoritative certification system that selects excellent companies respected by stakeholders.

Judges rank companies by evaluating their shareholder value, employee value, customer value, social value, and image.