Hong Kong and Thailand Central Banks About to Pilot a Joint CBDC
The central banks of Hong Kong and Thailand are closer to the implementation of a joint central bank digital currency (CBDC) for cross-border payments.
An official announcement on January 22 revealed the results of a collaborative CBDC research project known as Project Inthanon-LionRock. The two central banks published a joint press release and also provided a comprehensive 90-page report that exhaustively analyzed the likely risks and benefits of CBDCs for various aspects of finance.
As in the official announcement, the central banks initiated the project in May last year and were able to complete the joint initiative last month.
Ten banks from the two countries participated in the project involving a Proof-of-Concept (PoC) prototype based on distributed ledger technology. R3 likewise supported the project as a technology partner, notes the joint report.
The project involved the creation of a cross-border corridor between the currencies of the countries to permit funds transfer and operation of foreign exchange transactions on a peer-to-peer basis. This is anticipated to reduce settlement costs and time.
The blockchain platform of R3, known as Corda, forms the basis of the project and it implements smart contracts to carry out atomic Payment-versus-Payment (PvP) settlements for foreign exchange.
After a successful PoC, it was noted the CBDC could remarkably cut intermediaries and settlement layers when compared with the traditional banking payments system. It can also block risks like double-spending.
Mathee Supapongse of the central bank of Thailand expressed his optimism concerning the implementation of new technologies such as blockchain. He claimed that the collaborative effort of the two central banks is “only the beginning” in tackling current and imminent challenges and in enhancing cross-border funds transfer efficiency.
The joint statement says that both central banks have agreed to carry out more joint research in relevant areas.
Other central banks are also working on blockchain-based cross-border payments projects. A few days ago, the oldest bank in Thailand, SCB, partnered with Ripple towards the creation of a mobile app based on blockchain to offer immediate and low-cost cross-border payments.