A new proof-of-concept will be tested to send fiat-backed stablecoins between banks to reduce fees and transaction times on international payments.
South Korea’s Shinhan Bank and Hedera Hashgraph (HBAR) have completed a proof of concept that is designed to conduct international remittances using stablecoins on the Hedera Network.
The new proof of concept by South Korea’s Shinhan Bank for remittances can send money internationally within seconds for a fraction of a cent on the Hedera Network.
Hedera claims that the average fee per transaction on its network is $0.0001, and the average transaction time is 3-5 seconds, both vast improvements from what is currently available from traditional remittances.
In a Nov. 29 announcement, Hedera stated that it aims to determine whether it is possible to issue and distribute stablecoins for financial use cases with lower fees and shorter completion times than existing systems, while also making transactions traceable.
Hedera Hashgraph is a proof-of-stake, high-security public Distributed Ledger Technology (DLT) network. The proof of concept, which is proof that a certain method or idea is practicable, utilizes the Hedera Token Service (HTS) and Hedera Consensus Service (HCS).
Shinhan Bank is planning on minting Korean Won (KRW) backed stablecoins while international partner banks participating in the pilot will issue stablecoins in local currency. Bank clients who receive KRW stablecoins will be able to redeem them for local currency stablecoins, which can be exchanged for local fiat currency.
Reducing fees on international remittances is a pertinent use case for blockchains. The global average cost of sending $200 across national borders via traditional banks in Q4 2020 was 6.51% ($13.02), according to Remittance Prices Worldwide’s Dec. 2020 report. The average is expected to fall to 3% ($6) by 2030.
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Hedera CEO and Co-founder Mance Harmon said: “There is a massive opportunity to cut out the middleman and make this process dramatically more efficient and cost-effective, getting the most money possible to people who often need it urgently.”
Shinhan Bank has been a member of the Hedera Governance Council since April 2021. It has also been on Klaytn’s blockchain governance council since July 2021.
Hedera’s native token HBAR reacted strongly to the news posting a 10% gain over the past 12 hours according to CoinGecko.