Korea’s Shinhan to Offer Blockchain-Based Securities Lending

Shinhan Financial Investment will soon be offering peer-to-peer (P2P) stock lending via the blockchain.

When the new service is introduced this year, individuals will be able to borrow and lend securities with other individuals directly, rather than going through an intermediary. The Economic News and other local Korean media reported the news.

Securities lending and borrowing transactions are normally inefficient and expensive for anyone but larger investors. Commissions can be high and accurate information difficult to obtain. With a P2P service, individual owners of stock should be able to easily and cheaply lend their shares directly to others, earning a fee in the process. Individual short sellers will potentially be able to borrow stock from willing counterparties without having to pay exorbitant fees to large institutions.

Shinhan Financial Investment, which is a brokerage related to the country’s second largest banking group by assets, is developing the capability in cooperation with Directional, a Korean company that has been permitted by the Financial Service Commission (FSC) to provide stock lending and borrowing as part of the government’s sandbox initiative. Sandboxes, which are being aggressively pushed by the current administration, allow for a temporary lifting of regulations for the testing of innovative technologies and services.

Directional received its exception in May under a financial market sandbox program announced by the FSC in April. No timeframe has been reported for the roll out of the Shinhan offering.

Shinhan Bank has been aggressive in its pursuit of blockchain solutions. Two years ago, it started using the technology for the verification of gold bars. Since then, it has utilized it for interest rate swaps and and cross border remittances. In May this year, it was reported that the bank would use the technology for loan verification, enabling customers to electronically submit documents that previously had to be presented on paper, and often in person, and authenticated manually.

Like most commercial banks in Korea, Shinhan has been more enthusiastic about blockchain than pure crypto, tracking the official government stance but running counter to customer appetite for coins.

The bank was for a while more positive on crypto and accepted deposits from cryptoexchanges and exchange customers rejected by other banks. But in light of increased scrutiny by the authorities from 2018, and in light of new FATF standards, the bank has upped its surveillance of crypto-connected accounts and is instituting systems and procedures to enforce real-name account requirements and adhere to Know-Your-Customer best practices.

Like other banks, it is currently renegotiating its cryptoexchange deposit agreements. While an extension of its contract with Korbit, the local exchange it serves, is expected, nothing is guaranteed given concerns about possible fraud.

Image via Shutterstock.