South Korea’s top bank trials stablecoin VAT refunds

One of South Korea’s top five largest commercial banks, NH NongHyup, has announced the initiation of a proof of concept (PoC) project aimed at digitizing its VAT refund service for foreign tourists. Leveraging blockchain technology, the PoC will also explore the feasibility of instant payments using stablecoins.

### Collaboration with Industry Leaders

Sources close to the project revealed that the PoC will be conducted in partnership with major global players including Worldpay, Mastercard, Fireblocks, and Avalanche. Importantly, during the trial phase, no real customer data or actual money will be involved. The primary goal is to verify whether the adopted blockchain and stablecoin technologies function as intended and can be effectively utilized in practice.

### South Korea’s Stablecoin Legislation On the Horizon

South Korea is also nearing the finalization of its long-awaited stablecoin legislation. The central bank and financial regulators are currently negotiating who will oversee the regulation of digital tokens pegged to the Korean won. The Financial Services Commission (FSC) plans to submit a government-sponsored bill by the end of 2025. This will join five other competing stablecoin bills currently under review by the National Assembly, each introduced by different lawmakers.

### NH NongHyup’s Vision for Korea’s Tourism Economy

Choi Woon-jae, Executive Vice President of NH NongHyup Bank, emphasized the potential impact of stablecoin-based refund models. “This initiative demonstrates how blockchain technology can enhance national competitiveness and improve customer experience,” Choi stated. He outlined the bank’s ambition to secure a leading position in the digital transformation of Korea’s tourism economy by implementing strategies that enhance cross-border payment and settlement efficiency.

The PoC specifically targets the booming tourism market in South Korea by streamlining the VAT refund process. This process is crucial, as it allows foreign tourists to reclaim the 10% VAT paid on eligible purchases when they leave the country.

In 2024, South Korea welcomed approximately 16.37 million tourists, marking a significant increase of about 48.4% compared to the previous year.

### Modernizing the VAT Refund Process

NH NongHyup plans to modernize the traditional paper-based VAT refund system through two main approaches:

1. **Blockchain-Based Digital Tracking**: The PoC will explore an automated digital system that uses blockchain to track refund data. This will simplify and improve efficiency for both businesses and tourists.

2. **Stablecoin Payment Testing**: The project will test stablecoin-based solutions to enable users to exchange currencies and complete payments more effectively.

### Commitment to Regulatory Compliance

As a key player in South Korea’s financial sector, NH NongHyup is committed to enhancing its VAT refund services and stablecoin payment solutions while fully adhering to new regulatory frameworks set by financial authorities.

### South Korea’s Regulatory Landscape for Won-Pegged Stablecoins

Sources involved in the PoC project highlighted that South Korea is actively developing regulations to foster a stablecoin market linked to the Korean won. This initiative aims to strengthen national control over monetary matters amid growing competition from US dollar-pegged stablecoins.

While financial regulators and lawmakers work together to establish clear guidelines for won-pegged stablecoins, major banks and institutions are similarly preparing to launch their own stablecoin projects—collaborating with partners and securing ticker symbols.

However, reception to the regulatory plans is mixed. The Bank of Korea supports providing banks with the opportunity to issue stablecoins, viewing it as a prudent measure. Conversely, private companies argue that non-bank entities should also be allowed to issue stablecoins to ensure healthy competition and foster innovation in the market.

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https://bitcoinethereumnews.com/finance/south-koreas-top-bank-trials-stablecoin-vat-refunds/

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