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South Korea Joins Global Initiative for Cross-Border Payments Tokenization

source-logo  financemagnates.com 03 April 2024 19:01, UTC

South Korea will participate in a collaborative project involving central banks and commercial lenders from seven economies that seeks to explore the tokenization of cross-border payments.

Along with the Bank for International Settlements (BIS), this initiative marks a significant milestone for Korea, highlighting the country’s efforts in the development of a central bank digital currency (CBDC).

Exploring Cross-Border Payments

According to a report by TheKoreaTimes, the inclusion of Korea in this global financial endeavor could open up new opportunities for its private financial and business entities in the digital finance space, particularly in trade financing.

The project, which includes central banks from five reserve currency economies, aims to leverage tokenization to enhance the speed and integrity of international payments while reducing costs.

By exploring the tokenization of wholesale central bank funds and commercial bank deposits on programmable platforms, participants aim to streamline cross-border transactions. This involves establishing a prototype system to address structural inefficiencies such as differences in legal, regulatory, and technical requirements, as well as varying operating hours and time zones.

Tokenization and Transaction Efficiency

Additionally, the initiative aims to bolster the detection of money laundering attempts and customer verification processes, which is currently affected by delays and high costs due to the involvement of multiple intermediaries. Through tokenization, the project endeavors to combine the record-keeping function of traditional databases with the rules and logic governing transfers.

This improves existing capabilities and enables new ones while ensuring the integrity and governance of the monetary system. The BIS’ Economic Adviser and Head of Research, Shin Hyun-song, highlighted that project Agorá enhances international payments.

By harnessing the power of tokenization, the project seeks to address the efficiencies in cross-border transactions while upholding the integrity and governance of the monetary system.

Expect ongoing updates as this story evolves.