KB Kookmin Bank will build deposit token payment infrastructure using existing payment networks.

KB Kookmin Bank said on Wednesday it has been selected as a participating institution in the "deposit token-based payment infrastructure expansion project" under the "blockchain innovation leading project" run by the Ministry of Science and ICT and the Korea Internet & Security Agency (KISA).

The project will be led by the Korea Financial Telecommunications and Clearings Institute under cooperation from the Ministry of Economy and Finance and the Bank of Korea, among others, and will be carried out as a private consortium with commercial banks and payment gateway (PG) firms taking part.

The goal is to build private-sector infrastructure that can use deposit tokens for real payments, based on the institutional central bank digital currency (CBDC)-based deposit token test conducted in the Bank of Korea's "Project Hangang".

The company said KB Kookmin Bank has built the broadest cooperation framework among participating banks with PG firms and value-added network (VAN) firms.

If deposit token payments are introduced, it expects to reduce payment fee burdens for small merchants and shorten settlement cycles that currently take 1 to 3 days to a level that allows immediate settlement.

It will also pursue technical cooperation with small and medium-sized companies and startups in blockchain and information technology (IT). It plans to jointly develop related technologies such as deposit token wallet integration, security solutions and smart contract verification.

KB Kookmin Bank also plans to participate in linked projects in the public sector, including a pilot project for the Ministry of Economy and Finance on national treasury fund management and government business promotion expense programmes, based on test results accumulated in private-sector payments.

A KB Kookmin Bank official said the bank will expand blockchain-based financial infrastructure into the area of real payments. The official said it will push the project to improve customer convenience and reduce payment and settlement burdens for small merchants.