South Korea's NH NongHyup Bank pilots stablecoin-led tax refunds on Avalanche

NH NongHyup, one of South Korea's five largest banks, has initiated a proof-of-concept to digitize value-added tax (VAT) refunds for inbound tourists and validate a real-time settlement model using stablecoins.

The PoC is held in collaboration with Avalanche, Fireblocks, Mastercard and Worldpay. This project uses Avalanche blockchain to test smart contract-driven refund automation and stablecoin-based settlements.

It will not, however, involve real funds or customer data, as the PoC is to confirm technical feasibility and operational viability, the press release noted.

“The stablecoin-based refund model demonstrates how blockchain can tangibly improve customer experience and strengthen national competitiveness,” said Choi Woon-jae, the executive vice president of NH NongHyup Bank. “We will lead the digital transformation of Korea’s tourism economy by enhancing cross-border payment and settlement efficiency.”

The PoC targets the growing number of tourists to South Korea, by improving the VAT refund process, which allows foreign tourists to reclaim the VAT (typically 10%) paid on eligible purchases when they take the goods out of the country. South Korea saw 16.37 million inbound tourists in 2024, a 48.4% growth from the previous year.

NH NongHyup aims to evolve the traditionally paper-based tax refund process in mainly two ways.

The PoC will test a blockchain-driven digital system that will automate the recording of refund data to enhance efficiency and convenience for both tourists and businesses. The project also tests a system using stablecoins to enable delay-free settlements and currency exchange for users.

NH NongHyup stated it plans to further develop its stablecoin-based payment and refund services, in compliance with the upcoming regulatory guidelines set by financial authorities.

KRW Stablecoin

South Korea is currently developing a regulatory framework to promote a Korean won-pegged stablecoin market, mainly to strengthen its monetary sovereignty against dominant U.S. dollar stablecoins.

As local lawmakers and financial authorities formulate regulations for won stablecoins, major banks and institutions are simultaneously preparing stablecoin ventures by forming partnerships and reserving ticker symbols.

However, there is ongoing debate surrounding the initiative as the Bank of Korea insists that stablecoin issuance should only be limited to regulated banks, while the private sector argues that non-bank entities should also be allowed to issue stablecoins to foster healthy competition and innovation in the market.