South Korea Seeks to Compete with USD Stablecoins Through Blockchain-Based VAT Reimbursements

NH NongHyup Bank, ranking among South Korea’s top five banks, has initiated a proof-of-concept (PoC) project to digitalize value-added tax (VAT) refunds for foreign visitors by utilizing stablecoin technology. This pilot, developed in partnership with

, Fireblocks, , and Worldpay, seeks to optimize the refund experience through blockchain-powered automation and instant settlements, according to a . This project is part of South Korea’s larger effort to create a local stablecoin ecosystem tied to the Korean won (KRW), aiming to compete with U.S. dollar-based stablecoins, as noted by .

The PoC utilizes Avalanche’s blockchain to

smart contract-based refund automation and stablecoin-enabled currency exchange. By removing delays in international settlements, the platform aims to boost efficiency for travelers, retailers, and banks, as referenced in the . NH NongHyup clarified that the pilot does not use actual money or customer information, focusing solely on technical and operational assessment, as reported by . The bank highlighted that South Korea received 16.37 million international tourists in 2024—a 48.4% rise from the previous year—underscoring the need to upgrade the conventional paper-based VAT refund system, as mentioned by .

If successful, the pilot could transform cross-border transactions by enabling quicker processing, lowering administrative expenses, and increasing transparency. Choi Woon-jae, executive vice president at NH NongHyup, remarked that the stablecoin approach "shows how blockchain can deliver real improvements to customer service and enhance national competitiveness," with intentions to broaden the system in line with forthcoming regulatory standards, as stated in the

.

South Korea’s stablecoin initiatives are gaining

as regulators work on policies to balance innovation with financial security. The Financial Services Commission (FSC) is preparing to finalize rules for KRW-backed stablecoins by the end of the year, which will ban yield-bearing stablecoins and align with global standards, as reported by . At the same time, the Bank of Korea (BOK) has voiced concerns about non-bank entities issuing stablecoins, advocating that only licensed banks should be permitted to issue them to minimize risk, as reported by . Despite ongoing discussions, leading banks and technology companies such as KB, Shinhan, and Naver are joining forces to develop infrastructure for won-pegged stablecoins, as reported by .

This pilot is part of a wider movement among financial institutions to adopt blockchain. NH NongHyup’s project follows similar efforts, including Woori Financial Group’s collaboration with Samsung and its investment in BDACS, a KRW1 stablecoin provider, as reported by

. With domestic stablecoin transactions already exceeding $41 billion, South Korea is positioning itself as a frontrunner in digital currency advancement, as highlighted in the .

As lawmakers move quickly to establish regulatory frameworks, the government is under pressure to act promptly to remain competitive with countries like the U.S. and Japan. Legislators, including Min Byoung-dug, a proponent of President Lee Jae-myung’s KRW-based stablecoin policy, argue that "the technology is mature, and market demand is clear," stressing the importance of swift implementation, as reported by

.

NH NongHyup’s project highlights the increasing integration of conventional banking with blockchain technologies, potentially transforming financial services for both local and global users.