Hana Bank issues South Korea’s first digital bond using Euroclear’s blockchain

The Korea Investors Service (KIS) is working on establishing new methods to evaluate the credit risks associated with digital financial products, as tokenized securities and stablecoins gain more traction within the broader financial sector. A spokesperson for the Moody's affiliate revealed on Monday that digital financial products can present risks that are distinct from traditional counterparts, even when they share the same credit rating.

While the automation and instantaneous settlement features of these products can lead to cost reductions, they also introduce potential vulnerabilities through reliance on platforms, smart contracts, and on-chain settlement mechanisms, notes Chung Hyuk-jin, the head of KIS's credit standards group.

Speaking at a media briefing, Chung emphasized that credit assessments for digital financial products should encompass technological risks in addition to conventional factors like an issuer's repayment ability, the creditworthiness of underlying assets, collateral security, and repayment priority. KIS categorizes these risks into four distinct groups: platform risk, smart-contract risk, external risk, and legal rights representation risks.

Stablecoins have been identified as one of the key digital financial products requiring such comprehensive risk evaluations as they become increasingly integrated into mainstream financial operations.