Proposal for Combining Central Bank Digital Currency and Deposit Tokens

To reduce the inefficiencies in cross-border remittances and payments, there is a call for a digital multi-currency system that utilizes central bank digital currencies (CBDCs) and deposit tokens. Lee Myung-hwal, a senior researcher at the Korea Financial Research Institute, pointed out in a report released on the 18th that the existing remittance methods through foreign exchange banks cause issues with fees and processing times. The report explains that while stablecoins enable real-time payments for peer-to-peer transactions, they still have limitations due to their reliance on existing financial networks. Therefore, it emphasizes the need for a combination of CBDCs and deposit tokens. CBDCs are digital legal tender issued by central banks, while deposit tokens are assets that tokenize deposits from commercial banks onto the blockchain. The combination of these two is expected to allow for real-time exchanges of stablecoins based on different currencies, facilitating immediate settlement and payment. The Bank of Korea is testing CBDCs and deposit tokens through 'Project Han River' and is also participating in the Bank for International Settlements' 'Project Agora.' The report anticipates that once this system is established, it will contribute to reducing international remittance costs and processing times, but it also notes that regulatory coordination between countries and ensuring payment security will remain challenges.