Shinhan Bank, SCB TechX, and Taiwan’s largest financial institution have successfully completed a stablecoin remittance proof-of-concept (PoC) pilot on the Hedera network, as announced on July 18, 2023.

Shinhan Bank, a leading commercial bank in South Korea, has KRW 664.4 trillion in assets and serves 27 million customers. SCB TechX Co., Ltd., an industry-leading and digitally native platform-as-a-service company, provides innovative banking and non-banking services to commercial institutions and consumers across Southeast Asia.

The Hedera network, on which the pilot took place, is the most sustainable public ledger for the decentralized economy, built by a global community and governed by a diverse council of industry-leading organizations.

A breakthrough in the use of blockchain technology for cross-border payments, the pilot achieved real-time settlement and real-time FX integration in the Thai baht (THB), the New Taiwan dollar ( NTD) and South Korean Won (KRW). This was accomplished in a test environment that aligns with current production capabilities.

Notably, the PoC supports EVM, which opens the door for any EVM-based stablecoin issuer to participate using the framework in the future. This pilot is a continuation of previous work by Shinhan Bank that began in 2021, when it partnered with Standard Bank on international stablecoin remittances.

Both Shinhan Bank and SCB TechX highlighted the potential of stablecoins to facilitate cross-border remittances. They emphasized that stablecoins offer a cheap, fast, and reliable way to transfer value across borders. This could significantly increase financial inclusion and improve access to financial services for individuals and businesses in underserved communities.

Stablecoins, such as those used in this pilot, are increasingly becoming a critical part of the crypto-asset ecosystem due to their frequent use in crypto-asset trading and as liquidity providers in Decentralized Finance (DeFi).

Despite their name, however, stablecoins may not always be stable. Its stability depends on the management of its reserve assets, which, if mismanaged, could lead to a loss of confidence and large-scale redemption requests, which could lead to financial instability.

Despite these challenges, the use of stablecoins in cross-border remittances, as demonstrated by Shinhan Bank and SCB TechX, is a testament to their growing use cases.

However, the potential risks and cross-border nature of stablecoins require the urgent implementation of effective regulatory, supervisory and oversight frameworks before further significant interconnection with the traditional financial system occurs.