The 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 an exhaustive analysis of the potential risks and benefits of the state cryptocurrency, as well as other aspects related to liquidity management and compliance with regulatory requirements. Banks launched Inthanon-LionRock in May last year, and in December the project moved to the final stage.
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The project participants were Bangkok Bank, Siam Commercial Bank, ZA Bank, as well as the 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 system participants 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 for atomic calculations with the exchange of foreign currency. In addition, the PvP (Payment-versus-Payment) mechanism is activated, which ensures the final transfer of payment in one currency only if the payment is finally paid in another currency.
Operations with state digital currency do not require the participation of intermediaries
After successfully testing PoC, banks came to the conclusion that, compared to 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.
Mathee Supapongse (Deputy Manager of bank of Thailand) pointed, that despite the fact that the project is at the final stage, banks 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 blockchain.
Recall that in May last year, the Bank of Canada and the Monetary Authority of Singapore (MAS) also announced the successful completion of testing cross-border transfers using blockchain and state cryptocurrencies. In addition, in November, MAS, together with JPMorgan, developed a prototype blockchain-based system for international payments.