If there is one area where the fiat system has always struggled, it is cross border remittance. Relatively high costs, slow and heavily bureaucratic, the remittance system has been a hindrance to the growing army of global workers who rely on cross border payments. From freelance designers and programmers to web design and writing, these things are done by people all over the world, for client’s in every continent. To streamline this process between Korea and China, and possibly transform remittance forever, Shinhan Bank is launching a new remittance service that uses Bitcoin as the intermediary funding.
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One of the major areas where Bitcoin and other digital currencies can really show their advantage over traditional fiat currency is in cross border transactions. Many in the industry have long thought that this is the area where a digital currency would make its most effective impact, and with the recent announcement by one of the largest financial institutions in South Korea, Shinhan Bank, Bitcoin could indeed be making that breakthrough.
Focusing on the China-Korea payment corridor, the Korean bank is set to launch a new remittance service that will use Bitcoin as its backbone. The system will move funds through Hong Kong as an intermediary due to digital currency transactions being legal there, and will go live for customers next month.
The system will work by using Bitcoin as the intermediary channel, with Shinhan Bank transfer funding into digital currency at a Hong Kong exchange, the Bitcoins will then be moved to a Chinese based exchange where the Bitcoins will be converted to local Chinese currency. The system is operated by Shinhan in partnership with blockchain remittance startup Streami, who are aggressively targeting the Asian remittance market.
It is interesting that this system is happening in South Korea, a country that is not only digital currency friendly, but one in which the government is actively pursuing the development of its own digital currency. While the merits of local digital currencies are questionable in themselves, the openness to the technology is a clear indicator to investors, and it seems this is producing results.
With this remittance channel in operation it could open a door for the industry to dominate the market over time. As a medium, digital currency is perhaps the most suited asset for cross border transactions that is available at present, offering a blend of security and convenience while maintaining independence from local government capital controls that present a persuasive solution. Given the size of the remittance market globally, currently around 4 trillion dollars annually, this is certainly a market that could make a huge difference to the entire industry in both the short and long term.