Korean participants in Project Pax had completed the first phase of the technical verification for a cross-border stablecoin remittance initiative between Japan and Korea.
Banks such as Shinhan Bank, Kbank and NH NongHyup Bank, alongside Web3 companies including Fair Square Lab and Korea Digital Asset Custody, represented the Korean side. The Japanese side included participants like Shoko Chukin Bank and fintech firms such as Progmat and Datachain.
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The organisations held a briefing in Tokyo this month to share the outcomes of the project. The verification process involved converting KRW into a KRW-pegged stablecoin domestically, transferring it using blockchain infrastructure, and then converting it into JPY. The stablecoin was applied only to the cross-border segment of remittances, retaining the existing domestic banking network.
Kbank mentioned that the transactions were processed faster and at a lower cost compared to traditional international transfer systems. The benefits of using an open API architecture allow broader participation by banks, secondary financial institutions, and corporations.
Despite the technical success, regulatory uncertainties have emerged as a significant hurdle. Currently, Korea lacks a regulatory framework for stablecoins, reflecting challenges and confusion in how foreign currency-denominated stablecoins entering the country should be handled. Participants also identified technical issues regarding real-time exchange rate fluctuations.
The challenges identified will be matters addressed through future consultations with regulatory authorities and bank foreign exchange departments. The alliance plans to move into the second phase of the verification in the near future, focusing on achieving real-time interoperability through integration with the SWIFT network and expanding use cases to support low-value remittances.
A Shinhan Bank representative said that the institution will continue to contribute to the Korea-Japan collaboration on stablecoin remittances.
