Hong Kong and Thailand have begun piloting a joint central bank digital currency for cross border payments
Hong Kong and Thailand have begun piloting a central bank digital currency (CBDC) for cross-border payments. The Hong Kong Monetary Authority and the Bank of Thailand have stated that they have built a prototype for a cross-border blockchain payment system. The Inthanon-LionRock project, completed in December, allows banks in Hong Kong and Thailand to send money to each other through smart contracts.
Under the Inthanon-LionRock project, both financial institutions began studying CBDC applications to improve cross-border payments in both regions. After developing a network of cross-border corridors, both banks began to carry out money transfers and forex transactions on a peer-to-peer basis that has been proven successful in reducing settlement time.
The network of cross-border corridors between the two countries, built on the blockchain platform of Corda, R3. It uses smart contracts to combine money transfers and foreign exchange transactions together, designed to enhance the bank’s foreign currency liquidity management.
Banks released a detailed 90-page report that supplies a complete analysis of the potential risks and benefits of CBDCs for real-time money transfer, liquidity management, regulatory compliance and other aspects of finance.
After HKMA and BOT initiated the Inthanon-LionRock project back in May 2019, the banks completed their joint initiative in December 2019, officially announcing the passage.
Built with smart contract technology and evidence-based distributed ledger technology (PoC), the newly created cross-border platform handles settlements in real-time. According to Mr. Edmond Lau, Senior Executive Director of the HKMA said that our joint research project with the Bank of Thailand marks an important first step to address the pain points of high costs and low efficiency in traditional cross-border payments.
Colin Pou, managing director at HKMA, told a media briefing that a real transaction had not been completed. Pou also said that the Monetary Authority has determined that the city will use the state-issued digital currency for domestic payment; the prototype is for cross-border transactions only.
Mathee Supapongse, BOT Deputy Governor, is very optimistic about the central banks’ deployment of emerging technologies such as blockchain, arguing that the recent joint efforts of CBDC by Hong Kong and Thailand central banks are just the beginning.
Although both the Hong Kong LionRock Project and the Thai Bank Project Inthanon are set to investigate the prospects of a central bank digital currency, the groups are separate. Hong Kong formed the group in 2017 and Thailand formed the group in 2018.
BOT and HKMA are not the only banks working on cross-border payment projects based on blockchain technology. In early January, SCB, Thailand’s oldest bank, partnered with Ripple to create a blockchain-based mobile application to provide instant and low-cost cross-border payments.
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