The Bank of Thailand and the Hong Kong Monetary Authority have made a joint announcement that the prototype they have been working on for a cross border digital currency trading has been completed.
The banks are now one step closer to creating a joint CBDC (Central Bank Digital Currency) that will facilitate digital currency payments between the two countries. The project has been named Inthanon-LionRock. It will use blockchain technology to make the process transparent and reduce the risk.
The announcement was made on 22nd Jan. by the two banks in a joint press release. The banks also shared a detailed analysis report of 90 pages explaining the risks and benefits of CBDC. Issues such as liquidity management, individual currencies, regulatory compliance, and fund transfer and remittances, and other financial elements have been dealt with.
At a press conference, Colin Pou, the Executive Director at HKMA, said that digital currency would help in making the cross border payment system efficient and less expensive. The banks have not yet mentioned date for the launch, though they are working on getting it ready.
Edmond Lau, senior executive director of the HKMA, added that the joint project with Thailand is the ‘first step to solve the issues of low efficiency and high cost of traditional cross border payments’. He mentioned that blockchain addresses various technical issues in practical application and offers references on the use of CBDC.
More research is being carried out by the banks related to other platforms and banks that are involved in cross border trading of digital currency.
Deputy Governor of the Bank of Thailand, Mathee Supapongse, said that the findings of their project have added ‘new dimensions’ to the studies conducted by the central bank committees on cross border payments.
Six major central banks came together to create a group with Bank of International Settlements (BIS) so that they can research the need for CBDC. The news was reported a day earlier, i.e., on 21st January. Banks from Sweden, Britain, and Japan were a part of the group while Thailand and Hong Kong were not.
The president of the European Central Bank, Christine Lagarde, said that there is an idea to launch their CBDC ‘without interfering with private companies that are already a part of a similar network’.
The project began in May 2019 in which ten banks from Thailand and Hong Kong were a part of the initiative, that included a Proof of Concept (PoC) model based on distributed ledger technology. Bangkok Bank and Siam Commercial Bank (SCB) from Thailand, ZA Bank and Hongkong and Shanghai Banking Corporation from Hong Kong were the major partakers in the project. The venture was backed by R3.
Corda, the blockchain platform by R3, has been used for carrying out atomic Payment vs Payment settlements for Forex. After the successful completion of PoC, the banks have decided that CBDC can minimize third-parties in the payment process.
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