When the Bank of Thailand initiated "Project Inthanon" back in August 2018, it was the talk of the town. One proposal in particular caught everyone's attention: digitisation of the baht, or the creation of a state-owned cryptocurrency called wholesale central bank digital currency (CBDC).
Working with eight commercial banks, the BoT expects to have a proof of concept prototype for the new digital currency ready sometime this year. However, while digitising the baht might seem simple enough, it is only a start.
Digital currency can only be made possible by creating a digital infrastructure, and that would involve a daunting transformation of the financial system that has evolved under the guidance of the Bank of Thailand since it was founded 76 years ago.
The Bank of Thailand is an independent national authority that regulates banking operations. It is responsible for maintaining complete and comprehensive records of all interbank flows of value in order to maintain financial stability in the country. In addition, it is in charge of making important decisions related to monetary policy that include reserves, interest rates, and many more.
In order to collect and record all the data it needs to carry out its many responsibilities, the central bank currently uses a system called Bahtnet (which actually stands for or Bank of Thailand Automated High-value Transfer Network). Project Inthanon envisages creating a new system of records for the BoT that would be self-operating and based on Corda, a private blockchain.
OPEN-SOURCE OPTION
Corda is an open-source platform for the financial industry developed by R3CEV, a distributed database technology company that counts about 40 of the world's biggest banks among its members, including Barclays, Bank of America, Credit Suisse and others. Bangkok Bank officially joined R3CEV in the last quarter of 2017.
One aim of Corda is to provide a platform with common services to ensure that any services built on top of it are compatible between network participants.
As you can see from the graphics, systems like Corda work in quite a different way from those like Bahtnet. Under Bahtnet, if Ana has 100 baht in her account at Bank AAA and she sends Bob 60 baht using the same bank, AAA will be responsible for recording the fund transfer transaction including the 40 baht remaining balance in Ana's account. But what happens if the transaction takes place between Bank AAA and Bank BBB? Who will be responsible for maintaining the consolidated transaction records of an interbank transfer?
A new system would do away with the need for all the bookkeepers and auditors who oversee Bahtnet, and who manually check and record sensitive data. Relying on a central entity to check data accuracy can be very expensive and inefficient.
Instead of an exhausting process of data reconciliation from the BoT alone, a private blockchain that consists of all the banks in Thailand would allow each bank to have its own ledger or data recorder that updates whenever an interbank transfer occurs.
For example, when Bank AAA makes a transfer to Bank BBB, the transaction will automatically be recorded on the ledger of all the other banks, thus enabling the real-time reconciliation of data.
With this system, the Bank of Thailand can also better regulate the flow of data and take financial decisions faster. When this happens, cheaper transactions, faster validation, greater privacy and security, and 24/7 banking will be possible.
ACCESS FOR ALL
When the internet was invented, information was democratised and became accessible to everyone. A teenager can create his own blog and it can be accessible anywhere the very second he publishes it. News gatekeepers and political parties can no longer censor data and control public access to unbiased information.
Today, new developments such as blockchain technology are giving us the opportunity to democratise the transfer of value.
Financial services are now more accessible with the use of mobile devices. Transfer of value can be very cheap and borderless. Massive financial transactions among banks can now be reconciled without the need for a third party.
Just over three years ago, the Bank of England invested £10 million in cryptocurrency research in an attempt to create a system similar to Bahtnet and to digitise the British pound. Today, the Thai government is finally making strides towards a similar development with the help of the R3CEV group and private entities.
Bitkub Group is among the companies in Thailand that are helping the country make the transition to digitising anything of value through its cryptocurrency exchange, ICO portal, and education hub.
Singapore, China and Russia are currently the leading countries when it comes to integrating blockchain in their central banking operations. Using these countries as models, Thailand is on the way to be among the world's blockchain leaders.
Jirayut Srupsrisopa is the CEO of Bitkub Group, an integrated blockchain technology developer and one of three authorised digital asset exchanges recently approved by the SEC.