South Korea’s NH NongHyup Bank has launched a proof-of-concept (PoC) project to test stablecoin-driven value-added tax (VAT) refunds for tourists visiting the country. This initiative is part of the bank’s broader mission to modernize South Korea’s financial and tourism systems using blockchain technology.
Collaborative Digital Pilot with Leading Tech Partners
The PoC is conducted in collaboration with Avalanche, Fireblocks, Mastercard, and Worldpay. Leveraging Avalanche’s blockchain, the pilot will test how smart contracts can automate VAT refund processes. While no real funds or customer data will be used, the project aims to validate the technical and operational feasibility of using stablecoins for seamless, real-time settlements.
NH NongHyup’s Executive Vice President, Choi Woon-jae, stated that the project demonstrates how blockchain can “enhance customer experience and strengthen national competitiveness.” He added that this initiative marks a significant step toward leading Korea’s digital transformation in the tourism economy, making cross-border payments faster and more efficient.
Automating VAT Refunds with Blockchain Technology
Currently, tourists in South Korea must navigate a paper-heavy VAT refund process to reclaim the 10% tax on eligible purchases. NH NongHyup’s new system seeks to eliminate this burden. By using blockchain, the PoC will automate refund recording and ensure transparency between tourists, merchants, and government agencies.
The integration of stablecoins will also allow for instant settlements and simplified currency exchanges, significantly reducing refund delays. This innovation comes as South Korea experiences a tourism boom, welcoming 16.37 million visitors in 2024—a 48.4% increase from the previous year.
Laying the Groundwork for KRW-Pegged Stablecoins
The pilot aligns with South Korea’s efforts to establish a regulatory framework for Korean won-pegged stablecoins (KRW stablecoins). These digital currencies aim to preserve national monetary sovereignty and reduce reliance on U.S. dollar-backed stablecoins.
However, the rising interest in stablecoins has sparked regulatory debate. While the Bank of Korea insists that only regulated banks should issue stablecoins, the private sector argues that fintech firms should also participate to foster innovation and competition.
NH NongHyup plans to expand its blockchain-based payment and VAT refund systems in compliance with the country’s upcoming stablecoin regulations. If successful, this PoC could position South Korea as a global leader in blockchain-enabled tourism finance, where stablecoins and smart contracts redefine how international visitors spend and save.
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FAQs
NH NongHyup Bank launched a pilot using stablecoins and blockchain to automate VAT refunds for tourists, making payments faster and paper-free.
The project teams up with Avalanche, Fireblocks, Mastercard, and Worldpay to test secure, real-time VAT refunds using Avalanche’s blockchain.
Blockchain automates refund recording, cuts paperwork, and enables instant stablecoin settlements between tourists, merchants, and tax agencies.
It supports Korea’s push for blockchain innovation, boosting tourism efficiency and setting the stage for future KRW-pegged stablecoin adoption.
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