June 5, 2023

Central Bank of Hong Kong and Thailand tested state cryptocurrency for international payments

Central Bank of Hong Kong and Thailand presented a report on the research project Inthanon-LionRock on the use of state cryptocurrency (CBDC) for international payments.

The report provides a comprehensive analysis.potential risks and advantages of the state cryptocurrency, as well as other aspects related to liquidity management and compliance with regulatory requirements. According to the document, banks launched Inthanon-LionRock in May last year, and in December the project moved to the final stage.

The project participants were Bangkok Bank, SiamCommercial Bank, ZA Bank, as well as Banking Corporation of Hong Kong and Shanghai, with the help of which a prototype proof of concept (PoC) based on distributed ledger technology was implemented. The technology partner of the project was the international blockchain consortium R3.

Banks managed to create a cross-border “corridor”,through which participants in the system will be able to make payments in Thai baht and Hong Kong dollars. The R3 Corda blockchain platform is expected to cut costs and save time in operations.

The system uses smart contracts toconducting atomic calculations with the exchange of foreign currency. In addition, the PvP (Payment-versus-Payment) mechanism is activated, which ensures the final transfer of a payment in one currency only if the payment has finally passed in another currency.

After successfully testing PoC, banks came tothe conclusion is that, in comparison with the traditional banking system, operations with state digital currency do not require the participation of intermediaries. Money senders can directly make payments on the blockchain using debit and credit accounts. In addition, this infrastructure prevents double costs.

“Despite the fact that the project is onthe final stage, we believe that this is only the beginning of the journey. Central banks still have a lot of work with partners to solve current problems and increase the efficiency of international transfers using the blockchain, ”said Deputy Bank Manager of Thailand Mathee Supapongse, adding that the Central Bank of Hong Kong and Thailand will continue joint research.

Recall that in May last year, the Bank of Canada andThe Singapore Monetary Authority (MAS) has also announced the successful completion of testing cross-border transfers using blockchain and government cryptocurrencies. In addition, in November, MAS, together with banking giant JPMorgan, developed a prototype blockchain-based system for international payments.