"Are Stablecoins the Only Option?"... Deposit Token Use Gains Ground

Bank deposits tokenized... diversifying payment methods
Deposit-based foundation maintained... expected to shorten fund transfer times
Roles expected to diverge by payment purpose

The potential use of deposit tokens as a blockchain-based payment method is taking shape. As consumer payment and remittance trials move forward and cross-border cash management services for businesses emerge, on-chain payment methods using existing bank deposits are drawing attention alongside stablecoins.

According to the financial sector on October 13, OCBC Bank in Singapore launched a cross-border cash management solution based on deposit tokens with global fintech company Ant International earlier this month. The service uses blockchain technology to enable funds held by affiliates in different countries to be managed around the clock. It uses deposit tokens denominated in Singapore dollars and U.S. dollars and is designed to settle internal corporate fund transfers in near real time.

A deposit token is a digital token representing a bank deposit that can be used on distributed ledger technology (DLT), such as blockchain. Unlike stablecoins, which are generally issued by issuers backed by reserve assets, deposit tokens are created by tokenizing bank deposits and used for payments.

In South Korea, the use of deposit tokens is also expanding, particularly for consumer payments and remittances. The Bank of Korea plans to resume follow-up live transactions for the general public within the year as part of the second phase of Project Hangang, a pilot program for deposit-token-based payments. BNK Kyongnam Bank and iM Bank have joined the second phase, bringing the total number of participating banks to nine, up from the original seven. In July, the Financial Services Commission newly designated the two banks as providers of innovative financial services and authorized the existing participating banks to expand where deposit tokens could be used and add remittance functionality.

Banks are paying attention to deposit tokens because they can draw on the efficiency of blockchain payments while building on the existing deposit system. Companies with affiliates in multiple countries face the burden of keeping funds in overseas accounts in advance or making transfers in line with banks' business hours. Analysts say that wider adoption of deposit-token-based payments could reduce the time required to move funds and improve companies' liquidity management capabilities through shared transaction records and simplified settlement procedures.

So far, there has also been active discussion of using stablecoins issued by private companies for on-chain transfers of funds. Some analysts say blockchain-based payment services can be implemented by tokenizing existing bank deposits, without using stablecoins. A financial industry official said, "Stablecoins have developed around use through various blockchains and digital wallets, while deposit tokens are being developed for use in combination with banks' existing payment infrastructure. The two payment methods are not in a direct substitution relationship."

As experiments continue to explore the use of deposit tokens and stablecoins for corporate cash management and international payments, the areas in which each method is used are expected to become clearer, depending on the payment purpose and the users involved. Another financial industry official said, "Not every transaction has to be processed using stablecoins just because it involves blockchain payments. The roles can be divided to suit each context, such as using deposit tokens for personal remittances and central bank money for settlements between banks." The official added, "It will be important to see whether a system can be established to connect different payment methods smoothly."

This content was produced with the assistance of AI translation services.