Bank deposits tokenized… diversifying payment methods
Deposit-based foundation maintained… expected to shorten fund transfer times
Roles expected to diverge by payment purpose

The potential use of deposit tokens as a blockchain-based means of payment is becoming more concrete. As consumer payment and remittance pilots move forward and cross-border cash management services for businesses emerge, on-chain payment methods using existing bank deposits are drawing attention alongside stablecoins.

According to the financial sector on October 13, OCBC Bank of Singapore and global fintech company Ant International launched a cross-border cash management solution based on deposit tokens early this month. The service uses blockchain technology to enable companies to manage funds held by affiliates in different countries around the clock. It uses deposit tokens denominated in Singapore dollars and U.S. dollars and is designed to enable near-real-time settlement of intra-company fund transfers.

Deposit tokens are digital tokens representing bank deposits that can be used on distributed ledger technology (DLT), including blockchain. Unlike stablecoins, which are generally issued by issuers against reserve assets, deposit tokens are created by tokenizing bank deposits and using them for payments.

In South Korea, the scope of deposit token use is also expanding, particularly for consumer payments and remittances. The Bank of Korea plans to resume follow-up live transactions for the public by the end of this year as part of the second phase of Project Hangang, a pilot program for deposit token-based payments. BNK Kyongnam Bank and iM Bank have joined the second phase, bringing the total number of participating banks to nine, up from the original seven. In July, the Financial Services Commission newly designated the two banks as operators of innovative financial services, while also expanding the outlets where existing participating banks can use deposit tokens and adding remittance functionality.

Banks are paying attention to deposit tokens because they can leverage the payment efficiency of blockchain while building on the existing deposit system. Companies with affiliates in multiple countries face the burden of pre-funding overseas accounts or making remittances in line with banks’ business hours. Analysts say that, if deposit token-based payments become more widespread, they could reduce the time required to move funds and strengthen companies’ liquidity management by enabling the sharing of transaction records and streamlining settlement procedures.

So far, there has also been extensive discussion of using stablecoins issued by private companies for on-chain transfers of funds. Some analysts say blockchain-based payment services can be implemented by tokenizing existing bank deposits, without using stablecoins. A financial sector official said, “Stablecoins have developed around use through various blockchains and digital wallets, while deposit tokens are being developed for use in combination with banks’ existing payment infrastructure. The two means of payment are not direct substitutes for each other.”

As experiments continue to explore the use of deposit tokens and stablecoins for corporate cash management and international payments, the areas in which each method is used are expected to become clearer, depending on the purpose of the payment and the users. Another financial sector official said, “Not every transaction has to be processed using stablecoins just because it is a blockchain payment. The roles can be divided to suit each setting, such as using deposit tokens for personal remittances and central bank money for payments between banks.” The official added, “It will be important to see whether a system can be established to connect different means of payment smoothly.”

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