Imagine reclaiming your VAT refunds instantly without waiting in long airport lines.
NH NongHyup Bank, one of South Korea’s five largest banks, is exploring exactly that by digitising the VAT refund process for inbound tourists using blockchain technology and stablecoins.
The bank has launched a proof-of-concept (PoC) in collaboration with Avalanche, Fireblocks, Mastercard, and Worldpay to test how smart contract-driven automation and stablecoin-based settlements could transform cross-border transactions.
The pilot focuses on streamlining the traditional paper-based VAT refund process, which allows foreign visitors to reclaim the 10% tax paid on eligible purchases when leaving the country.
South Korea saw 16.37 million inbound tourists in 2024, a 48.4% increase from the previous year, highlighting the growing demand for efficient refund systems.
The PoC will test a blockchain system that records refund data automatically, reducing paperwork, airport waiting times, and risks of lost forms, while enabling faster and more transparent settlements.
Avalanche’s high transaction speed and low costs make it suitable for banking applications.
The pilot applies smart contracts to automate refund approvals and stablecoins to allow instant settlements and currency exchanges.
According to Choi Woon-jae, executive vice president of NH NongHyup Bank,
“The stablecoin-based refund model demonstrates how blockchain can tangibly improve customer experience and strengthen national competitiveness.”
The PoC does not involve real funds or customer data, as it is aimed purely at testing technical feasibility and operational efficiency.
South Korea is currently developing regulatory frameworks to support won-pegged stablecoins, with the Financial Services Commission expected to submit a government-backed bill by the end of 2025.
The aim is to strengthen monetary sovereignty against dominant US dollar stablecoins.
While the Bank of Korea favours stablecoin issuance limited to regulated banks, private institutions argue that non-bank entities should also participate to encourage competition and innovation.
NH NongHyup’s initiative aligns with these regulatory developments, testing services that could expand into domestic and international payments once guidelines are formalised.
If successful, the PoC could allow tourists to receive VAT refunds faster and more securely while reducing operational burdens for merchants and banks.
By combining blockchain transparency with stablecoin efficiency, NH NongHyup seeks to position itself as a leader in Korea’s tourism-driven digital finance sector.
NH NongHyup’s office building in Seoul, South Korea.
Choi added,
“We will lead the digital transformation of Korea’s tourism economy by enhancing cross-border payment and settlement efficiency.”
The initiative also reflects a wider trend of traditional banks experimenting with blockchain technology.
While technical integration with existing banking systems remains complex, pilots like this one provide a blueprint for future adoption.
Global payment companies such as Mastercard and Worldpay are involved, highlighting the potential for a seamless cross-border payment ecosystem.
As South Korea moves closer to formalising regulations for won-pegged stablecoins, projects like NH NongHyup’s PoC offer an early glimpse into how digital currencies could integrate with everyday financial services.
Tourists could one day receive near-instant refunds directly into digital wallets, eliminating currency exchange delays and manual processing.
This pilot, presented at the 2025 Singapore Fintech Festival, has drawn international attention for its innovative approach to automating VAT refunds and exploring stablecoin settlements.
While still in testing, it positions NH NongHyup at the forefront of financial digitalisation in Korea’s tourism economy.
Coinlive sees this initiative as ambitious but not without hurdles.
While the PoC showcases technical promise, questions remain about whether stablecoins can gain broad adoption in a market tightly regulated and still dominated by legacy banking habits.
Can this system survive operational complexities, regulatory friction, and consumer inertia?
The project shines a light on the potential for banks to innovate, but also exposes the tension between experimental digital finance and entrenched financial norms, challenging both institutions and regulators to rethink the speed at which blockchain solutions can realistically scale.
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