Shinhan Bank, the oldest and second largest bank in South Korea, has entered into a partnership with the country’s largest telecommunications company to develop a blockchain platform for processing the digital tokens proposed by some of the country’s regional governments.
According to the Korea Times, the deal will involve the bank working on the financial aspects of the platform while Korea Telecom Corporation develops the blockchain itself.
Today’s internet is no more than a dump pipe
Korea Telecom, market capitalisation $6.7 billion, supplies the country with 90 percent of its landlines and 45 percent of its high-speed internet. Founded in 1981, it was also South Korea’s first telephone company.
It has been working on ‘Future Internet’, as it has called its blockchain project, since March 2018. Seo Young-il, the vice-president of the company’s dedicated blockchain research centre, told the Korea Herald: “Blockchain will be central technologies for digitalization in the ‘fourth industrial revolution’.”
He indicated that the purpose of the project is to modernise the entire internet: “Today’s internet is no more than a dump pipe unilaterally used by over-the-top content providers. By using blockchain technologies, data will be secured from hackers as transmitted through the unforgeable blockchain network and users will be transmitting their own data with one another based on trust with no need to rely on third-party OTT businesses.”
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In July 2018 it revealed the ‘KT Network Blockchain’, which it says can handle 2,500 transactions per second, and said that it would be working with China Mobile and NTT DoCoMo, Japan’s biggest mobile phone company, to extend the service worldwide. NTT DoCoMo recently partnered with a blockchain company called VeChain Thor in order to integrate it into its new 5G network.
On its part, Shinhan Bank has been working on blockchain technology since 2016. In November of that year, it announced a South Korea to China Bitcoin remittance service and was at the time the biggest financial institution to offer a cryptocurrency service. One year later it announced that it was developing a virtual safe service for customers to store their cryptocurrency wallet keys.
It was also the first South Korean bank to established a research centre dedicated to blockchain technology, according to the Korea Times. The rest soon caught on though – in July 2018, the Bank of Korea reported that more than $2 billion worth of cryptocurrency was being held by the nation’s banks.
This is part of a wider global trend of banks beginning to integrate blockchain services. For example, a group of European banks including Deutsche Bank, HSBC, Santander, and Societe Generale have been working on a system called we.trade since October 2017. In July they reported having successfully processed seven real-life transactions between ten companies over five days.
CoinDesk reported in April that Park Won-soon, Mayor of Seoul, had initiated development of a cryptocurrency for Seoul called the S-Coin. It is to be used by residents and employees of the city for welfare programmes, environmental programmes, and payment.
Cryptocurrency in South Korea has had a turbulent time of it. After a period which included restrictions, bans, at least one case of insider trading on the part of a government employee, and large-scale thefts from cryptocurrency exchanges, South Korea finally legalised cryptocurrency in July 2018. This came a couple of months after the government was forced to redefine Bitcoin in order to confiscate some from a convicted criminal.