• NH NongHyup Bank launches a proof-of-concept for stablecoin-based VAT refunds.
• Collaboration includes Avalanche, Fireblocks, Mastercard, and Worldpay.
• The project aims to automate VAT refunds and enable real-time settlements.
• Initiative aligns with South Korea’s growing tourism and stablecoin regulation plans.

NH NongHyup Bank, one of South Korea’s five largest banks, has initiated a proof-of-concept (PoC) to modernize VAT refunds for inbound tourists. The project seeks to test a stablecoin-based settlement model that could allow foreign shoppers to reclaim taxes more efficiently.

The PoC brings together several partners, including Avalanche, Fireblocks, Mastercard, and Worldpay. It leverages Avalanche’s blockchain to pilot smart contract-driven refund automation. By doing so, the bank hopes to streamline processes that have traditionally relied on paper forms and manual verification.

The project is entirely technical at this stage and does not involve real customer funds or personal data. Its focus is on validating operational feasibility and confirming that stablecoin settlements can work in real time.

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Blockchain and Stablecoins at the Core

The initiative relies on stablecoins to enable instant cross-border payments. Since refunds are tied to a digital currency, NH NongHyup receives instant refunds, which could be slower when traditional payment systems are involved. Smart contracts are responsible for the storage and execution of data relating to refunds, hence eliminating potential mistakes when retailers or tourists process refunds.

The bank highlights that this technology may upgrade the competitiveness of South Korea as a tourism destination in the international market: In 2024, South Korea received 16,370,000 visitors, a 48.4% surge compared to the same period last year. NH NongHyup believes that VAT refunds via digital technology will make tourism even better by benefiting the locals as well.

Preparing for a Regulated KRW Stablecoin Market

The South Korean government is establishing a framework for won-pegged stablecoins. The overall aim is to enhance the country’s monetary sovereignty as a solution to the global reliance on dollar-pegged stablecoins.

The PoC developed by NH NongHyup is consistent with this initiative. The bank is targeting an extension of its e-refund payment and e-payment services once a regulatory system is established. A disagreement still exists, though, as to whether companies should be authorized to create stablecoins or not. The Bank of Korea favors regulation by banks, while other companies may want all companies allowed to innovate.

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