BoT plans overhaul with blockchain

BoT plans overhaul with blockchain

Veerathai Santiprabhob, Bank of Thailand governor, gives the keynote speech at Bangkok Fintech Fair 2018. He said the central bank will use blockchain to create an interbank payment system.
Veerathai Santiprabhob, Bank of Thailand governor, gives the keynote speech at Bangkok Fintech Fair 2018. He said the central bank will use blockchain to create an interbank payment system.

The Bank of Thailand plans to adopt blockchain technology for its bond issuance and wholesale central bank digital currency, an interbank payment system.

Blockchain technology would improve productivity and lower operating costs with higher security, said central bank governor Veerathai Santiprabhob at Bangkok Fintech Fair 2018 on Monday.

The central bank's bond issuance via blockchain technology would shorten the time for bond underwriting from around 15 days to a few days, he said.

The bank has a proof of concept to use blockchain for a wholesale central bank digital currency project called Inthanon. The project would improve the central bank's management of interbank baht settlement in the banking industry, keeping it in line with the direction of its counterparts across the world.

The central banks of Canada, England, and Singapore have already rolled out wholesale central bank digital currency services, while those of South Africa and Saudi Arabia are studying the project.

If the central banks can build up an ecosystem to link them across the world, it would open up a cross-border platform, said Mr Veerathai. The project would increase efficiency and slash interbank settlement costs.

"More than five financial institutions, both local large and foreign banks, have shown interest in participating. With the massive transaction volume of such banks, the project would improve efficiency and the country's ecosystem," he said.

In a related development, 14 commercial banks have teamed up with seven partners to set up the country's first Thailand Blockchain Community Innovative project, starting with blockchain-based letter of guarantee (LG), which is now being tested out in the central bank's regulatory sandbox.

The seven partners are Metropolitan Electricity Authority, Provincial Electricity Authority, and Electricity Generating Authority of Thailand, PTT Global Chemical Plc, PTT Polymer Marketing, IRPC Plc and Siam Cement Group.

Related technologies and legal aspects of the initiative are being supported by Accenture, Baker & McKenzie, and NECTEC and IBM.

Predee Daochai, chairman of the Thai Bankers' Association, said there are about 500,000 LGs worth 1.35 trillion baht in the country's banking industry.

Several corporate companies are paying interest to take part in the blockchain-based LG service, which is expected to exit the sandbox in the third quarter of this year.

"The financial service adopting innovative technology will cut down the operating costs of business operators significantly compared with the traditional process. Fees charged by the digital financial service will depend on market mechanisms in line with competition in the industry," he said.

In the meantime, Mr Veerathai said the central bank has also adapted itself in preparation for digitisation, including regulation amendment in accordance with technology development.

The Bank of Thailand's Payment System Act is scheduled to take effective from Apr 16, this year.

Moreover, there are several innovative financial services being tested in the regulatory sandbox.

These include blockchain cross-border remittance services, biometric, electronic know your customer, and QR code payment for debit and credit card.

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