South Korea Planning to Release Government Blockchain Bonds

South Korea’s stance towards blockchain technology has always been favourable, granted its numerous use case scenarios. Now, recent reports indicate that the South Korean government, alongside the country’s central bank, are planning to introduce a blockchain-based system for government bond management.

At this point in time, bond transaction records are being kept and managed by the Korea Securities Depository. While this system was sustainable for many years, new demands require that bond storage should be moved to a blockchain-based record base that can be accessed via multiple nodes. These nodes will be owned and operated by several public entities, including but not limited to the financial regulatory authority, the Bank of Korea, and the Korea Fair Trade Commission.

The Korean central bank has been planning this move since late 2019, when it first published a proof-of-concept on the matter. Now, testing is already underway. According to Bank of Korea official, “We are using government bonds to record securities and cash transactions in a distributed ledger and test whether a real-time simultaneous payment trading system is possible.”

The upcoming blockchain-based bond system will rely on distributed ledgers to transparently and securely record all bond-related transactions that take place. The system also facilitates bond ownership transfer to occur as soon as the payment is sent. Thus, several advantages are offered: instant & cheaper transactions, transparency, immutability, security and easier bong property transfers.

 In terms of the supported payment method, it is not currently known whether the system will be based on a CBDC, or on the South Korean won.

Based on these aspects, the Asian nation is planning to follow through with a similar project as the World Bank. To put things into perspective, the World Bank raised $74M for a two-year bond that was created, managed, transferred and allocated exclusively via blockchain technology.

All in all, the successful completion of this endeavour will represent one of the first public and state-sponsored blockchain implementations on the South Korean financial market.