The central banks of Hong Kong and Thailand have taken another step forward to use a jointly developed central bank digital currency (CBDC) for trans-border payments.
In this regard, the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT) disclosed the result of an endeavor named Inthanon-LionRock, involving joint study of CBDC.
The banks, in addition to publication of a news report, have issued an elaborate 90-page document given a detailed assessment of the likely pros and cons of CBDCs in instantaneous money remittance, handling of liquidity, regulatory conformity and other elements of finance.
After the HKMA and BOT started the Inthanon-LionRock venture last May, the banks finished the joint initiative last month.
Ten partaking banks from Thailand and Hong Kong took part in the venture and included a Proof-of-Concept (PoC) model based on distributed ledger technology.
Specifically, Thai partakers included banks such as Bangkok Bank and Siam Commercial Bank (SCB), while Hong Kong stakeholders included Hongkong and Shanghai Banking Corporation and ZA Bank.
Furthermore, the venture is backed by popular enterprise blockchain consortium R3, which operates as a tech associate.
Within the venture, the banks established a trans-border path between Thai baht and Hong Kong dollars for the purpose of permitting partaking banks to move funds and carry out Forex transactions on a P2P basis, which is anticipated to slash settlement fee and time.
The venture utilizes R3’s blockchain platform Corda and employs smart contracts for the purpose of carrying out atomic Payment-versus-Payment (PvP) settlements for Forex.
A PvP settlement guarantees that the transfer of funds in one fiat currency happens only if the transfer of funds in another fiat currency gets completed successfully.
After completion of a successful PoC, the banks decided that the CBDC has the ability to considerably minimize third-parties and settlement tiers, a sharp contrast to payment network of conventional banks.
Furthermore, the blockchain based system avoids threats such as double spending. The document published by both parties’ states:
“For example, payers can directly and immediately settle payments with their payees via CBDC in a DLT network as opposed to going through via RTGS intermediaries, including banks, involving multiple debit and credit account entries. The infrastructure for these direct payments further prevents double-spending with temporal transaction orders in place.”
Mathee Supapongse, Deputy Governor of the BOT, was positive about central banks employing budding technologies such as blockchain, asserting that the recent joint CBDC initiatives by Hong Kong and Thailand’s central bank signals a start.
“Though our Project Inthanon has come to the last phase, I believe that it is only the beginning of our next journey where central banks and relevant partners collaborate to tackle existing and incoming challenges, as well as enhance our cross-border funds transfer efficiency…just like the old saying “Going together, we go further”
As per the joint statement, the BOT and HKMA have accepted to move forward with joint study in appropriate subjects.
In addition to BOT and HKMA, Thailand’s oldest bank SCB, is also working on trans-border payment system that uses blockchain technology. SCB is collaborating with Ripple to develop a blockchain powered mobile app to offer real-time and cost effective trans-border payments.
