Shin Hyun-sung, the Governor of the Bank of Korea, outlined a vision for the future that includes the tokenization of financial assets such as government bonds to automate bond settlements and collateral management.
On June 30, during the European Central Bank (ECB) Forum held in Sintra, Portugal, Shin presented a paper titled "Realizing the Integrated Ledger: Lessons from Project Han River."
The integrated ledger is an infrastructure that consolidates central bank money, commercial bank deposits, and assets into a single digital platform. This system integrates previously separate messaging, clearing, and settlement processes, allowing for immediate and simultaneous processing of individual asset transactions and multiple payment transactions as a single transaction. Notably, final settlements are made using central bank money, preserving the uniformity of currency across banks.
Regarding the introduction of private payment tokens, or stablecoins, Shin noted, "The weakness lies in the fact that the same 1 won does not always equate to the same 1 won. If the issuer's credibility falters, the value can fluctuate, and even tokens with the same name can be treated as different currencies depending on the blockchain they reside on."
Shin emphasized that the Bank of Korea's digital currency testing is approximately two years ahead of major central banks. The ECB aims to establish a blueprint for a tokenized currency ecosystem by 2028 with its "Apia Project."
He stated that it is necessary to consider tokenizing assets such as government bonds in addition to central bank money and deposits. "If government bonds are directly issued and circulated within the digital currency system, a series of processes from real-time verification of collateral asset eligibility and haircuts to maturity redemption can be automatically processed through smart contracts," he explained.
He added, "This can enhance the precision and responsiveness of monetary policy implementation and contribute to the stability of the financial system, thereby supporting the central bank's fundamental responsibilities."
The Bank of Korea plans to launch the second phase of Project Han River in the second half of this year. This phase will focus on utilizing the program functions inherent in the digital currency system for the execution of national treasury funds, including subsidies for electric vehicle charging infrastructure and public sector operational expenses.
Shin also suggested the need to utilize the integrated ledger for cross-border payment settlements. He proposed exploring ways to link the integrated ledger with the "Project Agora," a public-private partnership initiative for cross-border digital currency payment settlements led by the Bank for International Settlements (BIS).
"By processing foreign exchange and securities settlements in a single transaction, we can reduce costs and expand the international use of the Korean won," he said.
* This article has been translated by AI.
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