The Hong Kong and Thai central banks have progressed a step closer to being able to use central bank digital currencies (CBDCs) to make payments between the two countries more efficient, the banks said.
This announcement comes a day after the central banks of Britain, the euro zone, Japan, Sweden and Switzerland said they would jointly study the case for digital currencies.
The Inthanon-LionRock Project
The project involved ten participating banks from both Hong Kong and Thailand and featured a Proof-of-Concept (PoC) prototype based on distributed ledger technology. Particularly, Thai participants are banks like Bangkok Bank and Siam Commercial Bank (SCB), while Hong Kong participants included the Hongkong and Shanghai Banking Corporation and ZA Bank. The project is supported by major enterprise blockchain consortium R3.
The two central banks said they had successfully built a prototype system that allowed banks in the two countries to use a CBDC to transfer funds and make payments between themselves, potentially cutting layers out of typical existing processes.
The project is based on R3’s blockchain platform Corda and implements smart contracts in order to perform atomic Payment-versus-Payment (PvP) settlements for foreign exchange. A PvP settlement is a mechanism that ensures that the final transfer of a payment in one currency occurs if and only if the final transfer of a payment in another currency or currencies takes place.
According to Colin Pou, executive director at the HKMA, The two banks have not set a time for a real transaction; However, the project could be expanded to include other central banks, or linked with other, separate initiatives.
Thailand is one of Hong Kong’s top 10 trading partners, with trade between the two totaling HK$153 billion ($19.69 billion) in 2018, according to Hong Kong official data.
The BoT and the HKMA are not the only banks that are working on cross-border payments projects based on blockchain technology. Earlier in January, SCB, Thailand’s oldest bank, partnered with Ripple to create a blockchain-based mobile app to provide instant and low-cost cross-border payments.