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Laos’ central bank intends to explore issuing its own digital currency, according to a news article that provided details of the plan. A study on the subject will begin soon and will be conducted with the support of a fintech startup based in Japan.
Central Bank of Laos joins race to develop digital Fiat
The Bank of the Lao People’s Democratic Republic to launch the study focusing on the development of a central bank digital currency (CBDC) as of this month, Nikkei Asia unveiled on Sunday. The monetary authority called on the Japanese fintech company Soramitsu, which was involved in a similar project in neighboring Cambodia.
The collaboration report comes out after Laos recently signed a memorandum of understanding with the Japan International Cooperation Agency. Soramitsu, a company specializing in blockchain finance, participated in the establishment of the Bakong digital payment system in Cambodia intended to reduce the country’s dependence on the US dollar.
The Bakong payment application has been downloaded by 200,000 users since its introduction to the public. The app can be used to pay for goods and services at 2,000 stores in Cambodia, as Soramitsu and other fintech entities strive to further expand the digital payment platform’s coverage across the country .
The Laos study, assisted by the Japanese startup, will assess the role of commercial banks and other financial intermediaries as well as the country’s needs in terms of financial inclusiveness. If the Vientiane authorities ultimately decide to issue a state-controlled digital currency, Soramitsu will also play a role in its actual development.
A digital version of the Laotian kip would improve the government’s ability to collect the data needed to “take the pulse of the economy” and better track the amount of money in circulation, Nikkei noted. The move comes as regional power China moves forward with its digital yuan project and some neighbors want to prevent excessive yuan inflows into their economies by launching their sovereign digital currencies. Laos, a landlocked country in Southeast Asia, borders the People’s Republic, which is its second largest trading partner after Thailand, according to the World Bank.
While the Chinese CBDC is mainly tested at the national level at this stage, Beijing should promote as a tool for international transactions sooner or later. China is already working with Thailand and the United Arab Emirates on a project led by the Bank for International Settlements (BIS) innovation hub. Its Hong Kong Special Administrative Region announcement in June, it wants to connect its national payment system to the e-CNY infrastructure to test digital currency in cross-border scenarios.
Besides the People’s Bank of China, dozens of central banks around the world are currently working on the development and launch of CBDC. These include the US Federal Reserve, Bank of Russia, and the European Central Bank. In Asia, Bhutan and the American blockchain company Ripple announcement last month, their partnership on a digital currency pilot project. The small Himalayan kingdom, which also borders China, plans to experiment with the digital version of the national fiat currency, the ngultrum, on Ripple’s private ledger.
Do you expect more Asian countries to start exploring options for issuing national digital currencies? Tell us in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
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