South Korea's NH NongHyup Bank Launches Stablecoin VAT Refund PoC on Avalanche

South Korea's NH NongHyup Bank, one of the country's top five commercial banks, has initiated a proof-of-concept (PoC) to digitize Value Added Tax (VAT) refunds for foreign tourists using blockchain technology and stablecoins. The PoC, conducted in collaboration with Fireblocks, Mastercard, Worldpay, and Avalanche, leverages the Avalanche blockchain to automate refunds via smart contracts and enable instant settlements with stablecoins.

According to the bank's press release, the pilot aims to replace the traditional paper-based refund system, which is slow and costly, with a digital process that automates tracking and reduces fraud. No real money or customer details are required during this testing phase, as the focus is on validating the technology's functionality. The initiative targets South Korea's booming tourism sector, which welcomed approximately 16.37 million tourists in 2024, a 48.4% increase from the previous year, and seeks to reclaim the standard 10% VAT on eligible items more efficiently.

Choi Woon-jae, executive vice president of NH NongHyup Bank, emphasized that this model demonstrates how blockchain can enhance national competitiveness and customer experience, with the goal of leading Korea's tourism digital transformation. The PoC will explore two main approaches: a blockchain-based digital system for automated refund data tracking and stablecoin-based currency exchange for payments.

This development aligns with South Korea's broader regulatory efforts, as the Financial Services Commission (FSC) plans to submit a government-sponsored stablecoin bill by end-2025, amid ongoing debates between the central bank and private sector over issuance rights for won-pegged stablecoins.